Car Totaled and Still Owe Money in Utah–What Can You Do?

Posted June 17, 2020 | Personal Injury Blog

For the average Utah resident, a car is a necessity, particularly during those harsh winter months. This is why a wrecked car can be a major setback for anyone living in Utah. While you could take public transport, the reality is that people prefer and depend on their vehicles to get around.

Besides, it’s not just about the ease of commuting and daily living. It’s also about quality of life. Utah has some locations notorious for bad air quality, which means: Not having a car and spending more time moving around outdoors equals inhaling potentially carcinogenic air particles.

But the problems go far beyond that. When your car is totaled and you’re still making car payments, you may be devastated. You may feel out of sorts and wonder what you can do. How can you salvage the situation? What are your options and can you even get a new car?

What Does the Term “Total Loss” Mean?

When you get in a car accident, insurance companies are often able to help pay for the repairs to your vehicle. But when the damage is severe and the cost of repairs seems astronomical–for example, more than 80 percent of the car’s value–the car is likely declared a total loss.

This usually means that the car is so damaged that it doesn’t make any sense to repair the vehicle–from the standpoint of the insurance company. So the company will cut you a check at the vehicle’s current market value.

For example, let’s say your car was valued at $12,000 at the time of the accident. The insurance company, applying the “80 percent rule,” will determine if the cost of repairing the car is less than $9,600. If it is, then the car is salvageable and the insurance company will pay for the repairs.

On the other hand, if the damage totals up to $9,600 or more, the insurance company will likely pay you the full cost of your vehicle. Now here’s where it gets interesting: If you owed money on the car, the check they make out to you as the payee will also contain the name of the lienholder.

A lienholder is the entity that either leased you the car or gave you a loan for the car. This is the lender that you make your car payments to each month. They are, therefore, the first priority for the payment–not you.

Thus, the lienholder has the right to deduct their payment on total loss vehicles before you get anything–if you get anything. Only if you hold a Guaranteed Auto Protection (GAP) Waiver may it be possible to have the remaining amount you owe reduced or waived upon the total loss of your vehicle. 

If you’re confused about how total loss and GAP insurance works, you should speak to the experienced Utah car accident lawyers at Fielding Law.

What if the Payment Wasn’t Enough?

In our country, cars aren’t usually considered longstanding assets. From the moment you buy the car, it starts depreciating in value. Some makes and models may depreciate faster than others, but in the end, all vehicles depreciate over time.

In fact, the value of a brand new car drops by 10 percent within the first month of purchase, and as much as 20 percent within the first year. That’s a lot of value lost in a very short time.

How the value of your car affects the insurance payout

It’s not fair, but it is what it is. Utah’s insurance companies know this. Which is why their payout may be much lower than you expect. The good news, however, is that your vehicle’s market value isn’t determined by how much you owe the lending company.

For example, let’s say you bought the vehicle for $15,000 and have already paid off $13,500. If your car is currently valued at $10,000, the insurance company will pay you the $10,000 or so; not the $1,500 you owe the lending company. This way, you’ll still have $8,500 after the deductions. This is usually the ideal situation. 

How much is your car worth?

A well-maintained vehicle with relatively low mileage is bound to attract higher market value than a similar vehicle with higher mileage and poor maintenance history.

If you’d like to know what the current market value of your car is in Utah, use the resources at Kelly Blue Book. This will give you an idea of how much to expect from your insurance company.

If the insurance company intends to pay you less than the going market rate, you have a right to contest this. If you have this problem, call Fielding Law today at (801) 666-2912.

Do you have to keep making payments on a totaled car?

Unfortunately, yes. If your outstanding payment exceeds what you’re paid by the insurance company, you’ll still have to keep making car payments until you pay off your debt.

A totaled car doesn’t exempt you from making your car payments. You can’t default just because your car was a total loss. When you took the car loan or chose a car payment plan, you automatically entered into a legal agreement with the financing company.

You must keep your end of the bargain even if you no longer have the vehicle, seeing as the company kept theirs when they provided you with that credit facility.

What if You Want to Repair the Vehicle?

Sometimes, a car may have sentimental value. For this or other reasons, you may want to fix a totaled car even at the risk of exorbitant costs. Well, once the insurance company has written you a check, you can determine how to use the money.

You can either use the money for the repairs or buy a new vehicle. Remember, if the cost of repairs exceeds the amount you were paid, you’ll have to find a way to make up the difference. It’s no longer the insurance company’s business.

Sometimes the insurance company will take possession of the vehicle after paying you. Other times, they won’t even bother. If they take the wrecked vehicle and you insist on buying it back–at salvage value, of course–you should speak to the insurance company and work out a deal.

The good news is that it can be done. Please note, however, in some states you may not be able to get re-insured, and in others, you may have to restore the vehicle to an acceptable condition and pass appropriate tests and inspections to reinstate a clean title.

How Much Will the Insurance Company Pay You?

Ideally, this would depend on the limit of your auto insurance policy, whether you have collision coverage or not, who caused the accident, and whether you file a first- or third-party claim.

A first-party claim is filed with your own insurance company and doesn’t excuse you from paying your policy’s deductible. If the accident wasn’t your fault, then the company will seek reimbursement from the at-fault party.

Alternatively, you can seek payment directly from the at-fault party’s insurance company, regardless of whether you have collision coverage or not. This is known as a third-party insurance claim. When you file a third-party claim, the insurance company will pay only to the extent that their policy holder was at fault for your accident.

There are pros and cons for both first-party and third-party claims, so you should consult an experienced car collision attorney with Fielding Law to determine the best course of action.

In short, you can file damage claims with either your own insurance company or with the insurance company of the other party. Either way, this is tricky and should be handled by experienced car accident lawyers in Utah like Fielding Law. 

Contact an Experienced Car Accident Lawyer in Utah

Getting your car wrecked is no fun. If your car has been totaled and you’re in a fix about what to do, how to get your compensation, what alternative payment plans are out there, or how to pay off your car debt, we can help.

Fielding Law is a highly experienced car accident law firm in Utah dedicated to helping you get your life back on track quickly. Contact us today at (801) 666-2912 to schedule a free consultation and discuss your case.

Text edited by Mitchell Fielding, a personal injury lawyer and partner at Fielding Law. Mitchell is known for his hard work ethic, friendly personality and dedication to the law. You can find out personal injury law offices in Taylorsville, UT and Mesquite, TX.