If insurance companies have a clickbait word or phrase, it’s definitely “your car is totaled.” It evokes images of your vehicle in key scenes of a Michael Bay movie, obliterated by explosions, aliens or robots (or alien robots exploding), as the main characters run away in slo-mo. What does it mean when a car is totaled? Just as Hollywood blockbusters don’t quite capture reality, “totaled” isn’t always what it seems.
When is a car considered totaled?
“Cars are generally totaled for one of two reasons,” said Lisa Kowite, ASE master certified automotive repair technician and founder of Fired Up Automotive. “Either the cost to repair is greater than the value of the car itself, or it cannot be safely repaired.”
Just like your insurance rate, it’s nothing personal; the totaled car definition is just a math calculation. The numbers vary by the insurance carrier, your state’s laws and your vehicle’s cash value. Kowite says it’s usually the repair cost exceeding the value that totals out a vehicle, but there are some cases, like fires or frame damage, where even an expensive vehicle can’t be 100% repaired. What does it mean when your car is totaled? Simply that it’s better to walk away.
Totaled car definition: how do insurers determine this?
After an accident, Kowite said your vehicle gets towed to a repair facility. A technician will examine the car, adding up the cost of parts and labor. The tech’s job is to find the amount of money to get your vehicle in the condition it was in right before the accident.
Then a professional appraiser, either an insurance employee or outside contractor, inspects your vehicle. The appraiser usually also has mechanic/technician background experience, but is only looking for damage caused by the accident. Hail damage to the roof or your kid grinding Doritos into the carpet aren’t concerns here. The appraiser will compare the repair cost against totaling the vehicle, and usually go with whichever is cheaper.
“One surprising thing is how easy it is to total a car,” said Kowite. “Of course you’d expect that on an old model that only has a cash value of a few thousand on a good day. But you might be surprised by how easy it is to total a modern car, especially when there’s front-end damage.”
What determines my car’s value?
Insurance companies calculate the actual cash value of your vehicle based on certain metrics. This is a constantly changing value based on make, model, mileage, age, wear and tear, options, color, resale value and numerous other factors, including your ZIP code. Similar to looking up your vehicle’s trade-in value online, insurance companies use similar criteria to sum up your vehicle’s stated cash value.
Kowite said that sum is checked against the estimated repair costs. “If it exceeds—or in some states if it reaches a certain percentage of—the car’s actual cash value, then you should get ready to grab your personal stuff out of it and say your goodbyes.”
Before the appraiser is finished, you might get a hint by looking up your state’s “total loss threshold.” This is a percentage of damage that a vehicle must reach before being declared totaled. It varies by the state between 50% and 100% of the vehicle’s cash value, so location definitely matters.
What happens when my car is totaled in an accident?
If you have full-coverage insurance, today might be your lucky day. If you didn’t really like that car and you have full coverage, you might be getting paid. The insurance adjuster calculates an estimate of your vehicle’s cash value just prior to the accident and minus your deductible, that will be your buyout figure. If you accept, the insurance company buys your car. You get cash; they take your wreck away. If you don’t have full coverage, you’re out of a ride, but at least you were legally covered in the accident.
Does it matter if it’s my fault?
Being at fault does and doesn’t matter to your insurance company. Being the cause of an accident will likely raise your insurance rates. However, being at fault doesn’t affect the actual cash value of your vehicle, nor does the severity of the accident, so it has no bearing on determining if your 2001 Pontiac Aztek is totaled or not. (Hint: It probably is.)
Do I still have to pay the loan on a totaled car?
Sorry to make a bad day worse, but yes, you have to pay off the loan for a totaled vehicle. Otherwise, drivers could get out of their current loan by taking their Honda Civic off-roading like it’s a Jeep Wrangler driven by the Dukes of Hazzard. Ideally, you only have to make at most one more payment before your insurance company cuts you a check or simply sends it to your lender for payoff.
If you owe more than your vehicle is worth (and if you have an active loan, you probably do), then hopefully you have gap insurance to cover this amount. This type of insurance rarely comes in handy, but it can save the day by paying off the rest of your loan, up to a maximum amount set by the insurer. Without gap insurance, you owe the difference. You’ll need to keep making the payments on the busted vehicle you can no longer drive, as a damaged credit score due to missed payments won’t help you when it’s time to purchase a new car.
Is my car a total loss if the air bags go off?
File this one under the “maybe” category. Remember that totaling a vehicle is a cost/value analysis. Despite the common assumption, air bags deploying in an accident doesn’t automatically total a vehicle. This rumor probably started because when air bags deploy, it usually means serious damage. Also, air bags are still fairly expensive, with a local dealer quoting more than $2,100 (after labor) to replace the driver and passenger front air bags in a common car. If your vehicle is a 10-year-old Toyota Camry, yes, air bag deployment will likely total it. A 1-year-old Tesla Model X, probably not.
What happens to a car that’s totaled?
This one is really, “What does totaling a car mean for the car?” After professional appraisal, you have two main options: Keep it or leave it. If you keep your vehicle and plan to get repairs, it might be more work than you’re ready for.
“If your vehicle is totaled, that doesn’t necessarily mean it can’t be fixed,” said Kowite. “However, like your parents told you a thousand times, just because you can doesn’t mean you should. Of course every situation is different, but based on what I’ve seen as a tech, generally, if your vehicle is totaled, in the long run you’ll be better off taking the cash-value payout and moving on.”
“That can be tough to swallow if you still owe a lot on a vehicle or if you have a sentimental attachment to it. But from an impartial stance, if you keep a totaled vehicle, it’s going to have a salvage title, and that alone is a reason to ditch it. No one wants to touch a salvage title.”
Insurance companies don’t want a large fleet of totaled salvage title vehicles either, so they end up selling these vehicles at public auctions. After taking the buyout offer, and if you like to do things the hard way, you could then buy back your vehicle at auction. However, most severely damaged vehicles end up selling to salvage yards and metal recyclers as there’s so little value left otherwise.