My Car Was Written Off While Under Finance

My Car Was Written Off While Under Finance

Posted on June 23, 2021

Today it’s customer question time again. This is an interesting one that we don’t see too often but we thought would make a great topic for a blog post. The question was ‘what happens if my car is written off while under finance?'

Our Waterdown auto loans team takes this on and explains what happens.

Car Written Off While Under Finance - What Next?

Let’s get the bad news out the way first. Even if your car is written off, you’ll still need to pay off the loan. You borrowed the money and the lender still expects to be repaid.

If you’re lucky, your insurer will cover the current value of the car. This could be the same amount as is outstanding, it could be more, it could be less.

Insurance settlement figures are almost as convoluted as credit scores and could take up a whole series of blog posts of their own.

Suffice to say, a settlement figure should reflect the current market value of your car.

If you think it’s too low, don’t accept it and negotiate with the insurer. You’ll need to prove your case with accurate figures from the market or from Kelley Blue Book.

You also don’t have to accept that your car is a write off. Many insurers will just write off a car because it doesn’t make financial sense.

Typically, if the repairs would cost more than half the value of the car, they will write it off. You don’t have to agree with that and could buy the car from the insurer. If you go this route, you’ll need to report it to the Ministry of Transportation.

Settling the auto loan

What happens next depends on you. We’ll assume you accepted the settlement figure as it is market value.

You could use that settlement to pay off the Waterdown auto loan. This leaves you free and clear to get a new car with a new loan.

You could use that settlement to buy a new car and keep the existing loan. This is also acceptable, although you will need to inform the lender of the change as your loan is likely secured on the written off car.

We tend to recommend settling the loan with the insurance money and starting again. This leaves you free to look for a new car, look for competitive loans and go through the entire process without the baggage of the old car.

It won’t work for everyone though so it entirely up to you.

If you were in negative equity, you’ll have to find extra money to make up the difference to pay off the loan.

If you don’t have any savings, you may need to save up for a down payment in order to lower the next loan amount.

If you have had credit issues since taking out the loan, you may have to improve your credit score in order to qualify for a new loan. There’s a lot to consider and far more than a blog post could cover!

Contact Unique Chrysler for help, advice and competitive Waterdown car finance and leasing.

For any questions, concerns, or inquiries. Please don’t hesitate to contact us here!

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