What to Do When You Totaled Your Car and Still Owe Money

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Edgar Moulton.


Edgar Moulton. Car Expert

What will you do if your car is totaled but you still owe money at the bank? If you are still paying for a vehicle but have lost it due to an accident or some other reason, the debt will remain with you until the lender is paid in full. 

This debt can become quite troublesome if you don’t plan accordingly by protecting yourself with comprehensive insurance coverage like GAP. So, what to do when your car dies and you still owe money on it

Those who fall victim to this predicament need not fret because we can offer a few solutions.

Can an Insurance Company Pay Off a Loan?

If you are involved in an accident that totals your vehicle or damages it so that it is no longer operable, your insurance company is likely to pay the loan balance owed on your vehicle. This will leave you responsible for the difference if your insurance payment is less than what you still owe to the bank. 

When your car gets in an accident that ruins major parts, repairs can be expensive. The insurance company will consider it a total loss if it would cost more to fix than what it's worth. State requirements differ, but the damage will have to be at least 60 percent of the car’s actual cash value. To help you get an estimate, you can use our car value calculator.

What happens if your car is totaled and you still owe money on it? In this case, your car will be deemed a total loss, and you will receive an insurance payout minus your deductible. 

The payout will cover the car’s cash value just before the accident up to your policy limit. For instance, if the actual cash value of your totaled vehicle is $20,000 and you have a $1,000 deductible, you will receive $19,000 as your payout. That’s enough cash to buy another car.

But if you own a bigger loan amount, say you owe $15,000 on your car loan, the insurance company will pay you $10,000 for your crashed car. That means you would still owe $5,000 on the car.

Can You Sell a Wrecked Car with an Unpaid Loan?

What happens when your car is totaled and you still owe money? Is it illegal to sell a car when you still owe money for it? No, it is not illegal to sell a car that is currently financed. However, the process can be rather tricky. Because the car is still under finance, you would technically be selling something that does not belong to you yet, which means you need to make sure you know exactly what you're doing before attempting this course of action. 

As mentioned, after an accident, your insurance will check if your car is a total loss. If it is, then it will be classified as a total wreck.

Now, if you’re asking, “Is selling my wrecked car the right decision even if it’s still under a loan?” that would depend on how much you’ll end up getting with the insurance.

A totaled car is usually shipped off by your insurance company to a salvage lot and sold at a discount - so you might not get much from them. If you choose to keep your car after an accident, you can probably sell it for a higher price, especially if you sell to a top-dollar junk car buyer like Junkcarsus.

If your car is totaled and you still owe on loan, check with your insurance company and get their estimate for your car. If your computed value is more than the estimated value of the insurance, then the best solution is to keep it and sell it. In this case, the insurer will take your deductible and include it with their calculation of your car's worth. They will then deduct that from your total settlement.

Junkcarsus Buys Wrecked Cars on the Same Day You Call

A car accident is an awful experience, and it can lead to more headaches when your car is considered a total wreck. You will be losing a significant amount of resale value and end up still paying part of the loan. Now you might ask, “Will selling my totaled car give me more money and pay my debt?”

If you decide to keep the car, you have a few selling options. You can try to sell it privately, part it out, or sell it to salvage yards.  But these guys usually buy it cheap.

Wondering how to sell a totaled car with an unpaid loan? Junkcarsus buys totaled old vehicles and junk cars in any condition. We give instant cash offers that are the best in town. We provide free towing and even assist car owners when dealing with difficult insurance paperwork. We have offices all over the USA, just call (855) 547-1550 and our friendly staff will answer all your questions.


What should I do if my car is totaled, but I still owe money at the bank?

First, have your insurance company assess your car if it’s considered a total wreck. If it is, the next step is to get the computed compensation less the loan balance. The insurer will buy your vehicle, but you have the option to keep it and sell it to a junk car buyer.

How do I sell a totaled car with an unpaid loan?

After the insurance computes your compensation and it’s not enough to pay off your loan. You can opt to keep the car instead of letting the insurer buy it from you. You can then try to sell it for a higher value to at least cover your loan balance. If your car has a lien, read this for more info.

How can I calculate my car’s value after an accident?

After an accident, you can compute your car’s value using this online calculator. You can then use this estimate and compare it to the insurer’s computer value. This way, you can check if you’re getting fair value.

Edgar Moulton.


Edgar Moulton. Car Expert

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