What Is My Car Worth If Totaled – When your car is in an accident, your insurance company will pay you the total value of the car—or, more precisely, it will pay you what it claims to be worth.

Almost everyone who has gone through this process can attest that the most frustrating part is receiving the auto insurance company’s assessment of your car’s value. Almost always, the estimate comes in lower than you expect, and the amount you receive isn’t enough to buy an apples-to-apples replacement. Sometimes, it’s not even enough to pay off their car loan.

What Is My Car Worth If Totaled

What Is My Car Worth If Totaled

What makes the issue confusing is the fact that most customers are not familiar with the method used by insurance companies to value cars. Car insurers’ valuation methods are esoteric, relying on abstract data, the details of which they are careful not to disclose. That makes it difficult for a consumer to challenge a low offer from an auto insurance company.

What’s A Totaled Car Or Total Loss Vehicle?

Knowing the basics of how insurance companies value cars and the terminology they use can put you in a stronger position from which to negotiate.

When you report a car accident to your insurance company, the company sends an adjuster to assess the damage. The adjuster’s first order of business is to decide whether to classify the vehicle as totaled.

An insurance company may consider the car to be totaled even if it is repaired. Generally speaking, the company decides to total a car when the cost of repairing it exceeds one percent of its value, anywhere from 51% to 80%, according to Insure.com. Some states mandate or provide guidelines for this percentage: Alabama, for example, sets it at 75%.

Assuming the vehicle is totaled, the adjuster will then conduct an appraisal and assign a value to the vehicle. Accidental damage is not considered in the evaluation. What the adjuster wants to estimate is a reasonable cash offer for the car before the accident happened.

Can I Sell A Totaled Car?

Next, the insurance company enlists a third-party appraiser to issue its own estimate on the car. This is done to minimize any appearance of impropriety or impropriety and to subject the car to a different valuation method. The company considers its own assessment and that of a third party in making its offer to you.

It may be possible to hire your own appraiser if you disagree with your insurance company’s valuation, although you may need your insurer’s permission to do so.

There is a big difference between the amount of your car insurance as determined by the insurance company and the amount that would actually cost to purchase a suitable replacement. The insurance company bases its offer on the actual cash value (ACV). This is the amount that the company determines that someone would reasonably pay for the car, if the accident had not occurred.

What Is My Car Worth If Totaled

Actual cash value usually takes into account factors including depreciation, wear and tear, mechanical problems, cosmetic blemishes, and supply and demand in your local area. For example, State Farm clearly mentions its car insurance value calculator: “We base your car’s value on its year, make, model, mileage, general condition, and major options—minus the your deductible and applicable state taxes and fees.”

What Happens When Your Car Is Totaled?

Before buying gap insurance, take the time to compare premiums and costs from the best car insurance companies to make sure you get a fair deal.

Even if you bought a new car and only drove it for a year before the accident, its ACV is significantly less than what you paid for it. Just driving a new car off the lot reduces it by 9% to 11%, and depreciation accelerates to 20% by the end of the first year.

In fact, the insurance company is asking you for everything from the miles on the odometer to the soda stains on the upholstery accumulated that year.

The value of the ACV offer is inevitably lower than the replacement cost—the amount it would cost you to buy a new vehicle similar to the one that broke down. Unless you are willing to increase the insurance premium with your own funds, your next car will be a step up from your old one.

Hold On! My Totaled Car Is Worth More Than Insurance Wants To Pay

This type of policy uses the same method of totaling a car but, after that, it pays you the current market price for a new car of the same type as your damaged car.

If you totaled your car shortly after buying it, you may end up with negative equity on the car, depending on your financing deal. In other words, the insurance premium may be lower than your car loan.

The situation may worsen if the car is new. The amount offered by the insurance company for the totaled car may not be enough even to cover the debt of the damaged car.

What Is My Car Worth If Totaled

This can happen if you break down a new car after buying it. A new car takes its biggest value hit when its new owner drives it off the lot. If an accident occurs within a year or more, it is likely that the payment for the totaled car will be less than what the owner owes.

Totaled Car And Total Loss: Everything You Need To Know

If a lender is able to obtain a court judgment they can pursue ways to collect the deficiency balance, including wages or bank account garnishment.

This may be more likely if the buyer takes advantage of a special financing offer that reduces or eliminates the down payment. While these programs certainly prevent you from parting with a large chunk of money to buy a car, they virtually guarantee that you’ll drive off the lot with negative equity.

If your insurance check doesn’t cover your car loan in full, the amount left over is known as a deficiency balance. Because it’s considered an unsecured debt—the collateral securing it is now destroyed—lenders can be aggressive about collecting it. This may include seeking a civil judgment against you to force you to pay your debt.

Like the replacement cost issue, this problem has a solution. You can add gap insurance to your policy to ensure you don’t have to deal with the remaining balance of a totaled car.

How Does An Insurance Company Determine The Value Of A Totaled Car?

This coverage pays the cash value of your car as determined by the insurance company and pays any shortfall balance left after you apply the proceeds to your loan.

Auto insurance companies use several factors when valuing a car. These factors may include the make and model of the vehicle, past accidents, normal wear and tear from use, any replacement parts, the vehicle’s mileage, and the overall market value. for the car.

When paying for the loss of your car, insurance companies usually use actual cash value, also known as market value, which takes into account the car’s replacement cost minus the deductible. This is what you will receive for the car if you sell it in today’s market. Replacement cost, on the other hand, is the cost of replacing your car with the same make and model. It does not take into account specific factors, such as wear and tear. The replacement cost is beneficial to the car owner while the actual cash value is beneficial to the insurance company.

What Is My Car Worth If Totaled

Yes, you can ask for more money if your car is totaled when negotiating with your insurance company. You need to do some research beforehand and provide a reason with support as to why you should receive more money. It is recommended to research the actual cash value of your vehicle, find out the total loss threshold in your state, and any other information that may help your case.

Totaled Cars In 2023: What You Need To Know

Dealing with insurance companies is always difficult, especially when a lot of money is at stake. Evaluating the value of a car can be more onerous than other areas of insurance because the valuation is entirely up to the insurance company and their procedures are rarely disclosed. Doing some research and familiarizing yourself with the process will help you gain a stronger negotiating position when dealing with your auto insurance company.

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