Buying a New Car After a Total Loss: What You Need to Know

A total loss happens when the cost to repair car damage from an accident is more than the car is worth. The damage could be from a collision with another vehicle or an act of nature like a tree falling on it during a storm. In any case, your first step should be to file a claim with your car insurance company.

Your insurance company will pay you the current actual cash value of the car, depending on your coverage and the circumstances of the accident, or pay the financing company if you still owe a balance. The actual cash value is usually less than what you paid for the vehicle.

If you still owe money on the car, the insurance check will go to pay the loan. You can take the car accident check and put it toward a new car if you own it outright.

File an insurance claim

Make sure you understand what type of coverage you have, as it could affect your insurance payout. Collision insurance protects your car in the event of a collision, while comprehensive insurance covers acts of nature, such as hailstorms and falling trees. Deductible and coverage limits may differ.

When you have a car accident, file a claim with your insurance company to start the process. First, the damage to the car will be evaluated and an estimate created. The insurance company will compare the repair estimate to your car’s current actual cash value (ACV), not what you paid for the vehicle. The actual cash value is based on the vehicle’s year, make, model, mileage and overall condition. The amount of your policy deductible and any state taxes and fees will also be deducted to determine the ACV.

This process could take a few days to several weeks, depending on the workload and capabilities of local adjusters and body shops. After a severe regional hailstorm or a hurricane, for example, it could take weeks for adjusters to inspect all the affected vehicles.

When you file a claim, the insurance company will want to know detailed information about your accident, including:

• What happened and where
• Who was involved
• The other driver’s vehicle and insurance information
• Police report
• Loan information (lender, account number)
• Photos

As part of the insurance settlement, you will release your vehicle to the insurance company. That means you sign over the title to the insurance company, and they take physical possession of the vehicle. Make sure to clear out any personal items and information from the vehicle and delete any information in the phone and navigation system.

If you have a car that’s relatively low in value, the insurance company may declare it a total loss because the cost to repair is too high. However, the vehicle could be salvageable — if so, you could negotiate to receive a settlement and still keep the car, but it could have a salvage title.

Depending on your insurance policy, you may be eligible for a rental car, known as transportation expense coverage. The policy may pay up to a certain amount per day, and you could be responsible for any additional costs over the policy limits. You may be able to sign up for additional coverage that pays for a rental car up to 10 days after the settlement.

Filing an insurance claim on a leased car

The process for a total loss on a leased vehicle is similar to a financed or owned vehicle. Usually, the insurance payout for the actual cash value will go to the finance company. If it’s less than the remaining value of the lease, you will have to pay the difference, unless you have GAP insurance, which is required by many auto leases.

Tow the vehicle to an approved facility

After the accident, you can have the vehicle towed to an auto body shop approved by your insurance company, but you’re not obligated to use the recommended shop for repairs. However, there may be benefits associated, such as direct payments and guarantees on the repairs. Call your agent or the claims toll-free line to ask for an approved body shop nearby. Some carriers offer an online body-shop locator.

Your auto insurance may cover towing up to a specified distance in the case of an accident, even if you don’t have roadside assistance coverage. If you paid for optional roadside assistance coverage, it could also reimburse you for being towed for a breakdown or getting stuck. The at-fault driver’s insurance may pay for the cost of towing, so if you’re the responsible party, your insurance could end up paying for your own and the other driver’s towing fees.

Check on the paperwork

After you’ve filed a claim, keep track of the paperwork. Hold onto any receipts for out-of-pocket expenses like towing or lodging and make sure to submit them. In addition, check in with your insurance company and your lender.

Follow the process through the insurance company’s online claims site or call your contact. The claims processor may ask for more information, so watch for any messages through the claims portal, email or phone. Drivers should email or fax any outstanding paperwork as soon as they can in order to expedite the process. Your claims contact will let you know how and when you can expect to receive the claims settlement. Ask your lender for the loan payoff amount so you can see if the settlement amount will pay off the loan.

Top insurance provider claims websites

File a GAP claim

GAP insurance will pay all or most of the difference between the balance of the car loan and the car’s actual cash value. It’s often required on leases and may be rolled into the lease payment. If you finance a vehicle, it’s a good idea if you have zero or a small down payment, or buy a car that depreciates quickly. File a claim with your GAP insurance provider (usually your lender or insurance company) or a separate GAP provider. They will need information about the insurance company’s settlement offer and the loan history.

Negotiate a payout

Your insurance company will give you a settlement offer based on the current value of your vehicle, though you can negotiate for more money if you think you can prove your car is worth more. If you’re going to try to make a deal, do your homework. Look for comparable sales on comparable vehicles with the same trim level, mileage and condition. You should also have proof of the costs for extras like upgraded wheels and tires or performance modifications.

If necessary, you can hire an independent appraiser to evaluate your car. To escalate it, you can contact your state’s department of insurance or even pursue arbitration or litigation, but the costs can be high.

The insurance settlement should include any applicable taxes, license fees, and other costs required to transfer ownership.

Talk to your lender

If your car is in an accident, you are still responsible for satisfying the loan agreement, even if the vehicle is totaled. To protect your credit score, you should continue making payments while the loss is being settled with the insurance company. If you still owe on the loan, the insurance company may send the proceeds to the financing company or to you to pay on the loan. Contact your lender to let them know what’s going on with your vehicle.

Accept the payout and start shopping

If the insurance settlement exceeds the loan balance, or if you own the car free and clear, you’ll receive a check or direct deposit from your insurance provider — you can then take the proceeds and start the car-shopping process again. First, develop a car-shopping budget so you know how much you should spend based on your income and financial situation. Then, shop for auto loan rates with the rate comparison tool.

New car after total loss FAQs

What happens if you total a leased car?

When you total a leased car, the insurance payout goes to the financing company. GAP insurance will cover the difference between the insurance settlement and the balance of the lease.

What if the total loss was not my fault?

The other driver’s insurance may pay for the total loss on your car, though the process will vary according to coverage and state laws. If another vehicle was not involved, but a tree fell on it, or something happens while the car is not in use, your insurance may pay the loss, depending on the types of coverage you have.

Can I negotiate with my insurance company on the total loss payout?

You can negotiate for a higher payout, but be prepared to back up your claims with solid research.

How much does insurance go up after a total-loss accident?

Your insurance may go up after a total loss, but the amount will depend on the circumstances of the accident and your coverage.

Will a total loss affect my credit?

A total loss won’t affect your credit as long as you keep your car loan up to date during the process.