Dealing with a wrecked car is tough. You’re probably still shaken from the accident that caused it, you have to say goodbye to a vehicle you love, and you have to find a new ride—probably in a short period of time.
With all that going on, making decisions about your “totaled” vehicle may feel daunting, even if you know what to do. If you don’t know what to do, you’re probably feeling lost and overwhelmed. We can help.
First, we put “totaled” in quotes because it’s an insurance industry term and applies only if you file a claim after the accident. Most insurance providers will use this label if the repairs needed to fix the car are equal to or greater than approximately 70% of the vehicle’s value, although that percentage will vary by provider and case.
There are four courses of action to take with a totaled car: Take the insurance check, sell it as a salvage vehicle, pay for repairs yourself, or donate it to charity. Here are some details on all four of those courses.
Assuming they have total coverage, most people with a totaled car choose to take the money provided by their insurance carrier.
Once your insurance provider (or the insurance provider of the at-fault driver) decides the vehicle is totaled, it will come up with a dollar amount for the car’s worth before the accident and send you a check for that amount, minus any deductible.
Before you get the check—but after you find out the total the insurance company wants to pay—you should do your own research about the value of the car to make sure you are getting fair compensation. You can use the CarGurus Instant Market Value calculator to help determine that value.
If you feel like the insurance company isn’t offering a fair price, you can go to a third-party appraiser to settle the difference, as long as this is an option under your insurance policy. However, you’ll want to be confident the discrepancy is significant, because you will likely be responsible for paying the appraiser regardless of whether they provide a more favorable valuation or not.
Once you’ve settled with the insurance company, you will sign over the car’s title to them. If you have a car loan, the lender holds the title and will need to be part of this transaction. It’s also very important to know that if you still owe money on that car loan, you remain responsible for paying it off, even if the car is totaled.
If you don’t have full coverage on your totaled vehicle, you can still get some money out of it by selling it to a dealership or junkyard as a salvage vehicle. And, of course, this is always an option if you think you can get more money from the salvage sale than you would from the insurance check.
If you’re going down this path, the first step is acquiring a salvage certificate by signing over the title to your local motor vehicle agency.
Once you have the salvage certificate, call around to used-car dealerships for offers on your totaled vehicle. Dealerships can make money on salvage vehicles by repairing and re-selling them or by stripping them down for parts. You’ll almost certainly get a range of offers, so shopping around to get the best deal is smart.
If you can’t find a dealership that wants your vehicle, try local junkyards. Again, shopping around is the wise move here, since you’ll likely get different offers from different yards.
When you’re deciding which junkyard’s offer is best, you’ll also want to factor in the possible cost of towing and the disposal of non-metal parts, such as tires. Some will tow your totaled car in for minimal or no charge, while others will charge premium rates and want you to pay for non-metal disposal fees.
When the dealership or junkyard pays you for your totaled vehicle, you’ll need to sign over the salvage certificate to them.
There are some instances when deciding to repair your totaled car will be the best course of action. The most important factors in this decision are the value of your car, the amount of your deductible, and the cost of repairs.
If your car is worth $5,000, for example, and your deductible is $1,000, taking the insurance payout may not make sense, because the deductible will chew into a big chunk of that payment and leave you with only $4,000 to spend on a new car. If the repairs for this hypothetical car worth $5,000 are going to cost somewhere in the $2,000 neighborhood, you might want to consider not making an insurance claim, paying for the repairs yourself, getting back on the road with your old vehicle, and beginning to put money away for your next car.
This course is really an option only for people with older cars. If your $50,000 BMW is totaled, chances are very good it will make the most sense to take the insurance check and start fresh.
The Gift of Giving
Finally, if you don’t need any cash compensation for your totaled vehicle, you might want to consider donating it to a charity. Doing this requires some time and research, but it could also lead to a tax deduction, depending on the charity and the value of your car.
There are multiple factors to consider when donating your car to charity, from determining your totaled vehicle’s market value to identifying an appropriate (and legitimate) charity to the paperwork Uncle Sam will ask of you. Luckily, everything you need to know can be found here, in our article How to Donate Your Car to Charity.