My car was totaled. Do I have to repay the car loan?
Q. I had a car loan and had an accident. The insurance company paid the value of the car to the lender, but this amount did not fully cover the loan. Do I have to refund the rest of the money?
A. We are sorry to hear of your accident and hope you were not injured.
Unfortunately, if your car is considered “totaled” by the insurance company, they are only responsible for paying the car’s actual cash value.
A car is generally determined to be “Totalized” if it is unsafe to drive even after repairs, or if the cost of the repair is more than it is worth, said Charles Pawlik, chartered financial planner and chartered financial analyst at Beacon Trust in Morristown.
“The actual cash value is basically the amount you would need to buy a comparable used car,” Pawlik said. “You would be responsible for paying any remaining balance of the auto loan to the lender in excess of this amount. “
This assumes that you do not have gap insurance on the vehicle, which can pay the difference between your car’s actual cash value and what’s still owed on the car loan, he said.
“This can be an important cover to get in order to protect you if an accident happens in the future, especially if you don’t make a large down payment for your replacement vehicle,” he said. “It is also important to check the valuation of your vehicle by the insurance company to make sure that you are not being offered / given you less than you owe.
You can check the actual value of your vehicle on websites such as Kelley Blue Book to determine the estimated value of your car for private sale as well as the car dealer’s trade-in value, he said.
He said it’s important to make sure you’re as specific as possible when entering your car details on sites like this, including mileage and any optional car features.
“You can take the average of the estimated private sale and dealer’s trade-in values to provide an estimate of the car’s actual cash value,” he said.
Send your questions to [email protected].
Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comof weekly electronic newsletter.