How to keep your totaled car

Crashed your car? Bummer. Even worse is getting a call from your car insurance company saying it’s a total loss and should go to the junkyard.

When your car is deemed a total loss after an accident, parting ways with it and accepting the insurance payout isn’t always the only option — keeping your totaled car is often an option that many drivers overlook. 

Whether you have a sentimental attachment, see potential in repairing the vehicle or want to salvage it for parts, keeping your totaled car can have its benefits. Before making a decision, it’s essential to understand what this choice entails – including the costs and legal requirements involved.

Opting to retain a totaled vehicle isn’t a straightforward choice; it involves weighing several factors such as repair costs, safety considerations and the impact on your insurance coverage. 

While the payout from your insurer can help you purchase a new car, keeping your current one could offer unique advantages, especially if you’re handy with repairs or find value in its remaining parts. However, this decision comes with challenges, from navigating salvage titles to dealing with potential liability issues. 

In this guide, we’ll explore everything you need to know about keeping your totaled car, helping you make an informed decision that aligns with your needs and circumstances.

What does it mean when a car is totaled?

Typically, cars are totaled when damage exceeds 65% or 70% of the vehicle’s actual cash value – but this threshold varies by state. 

The standard for deciding when a car is a total loss varies by company and may be set by state regulators. You can find out the threshold by contacting your insurance agent.

Car insurance companies find that many older cars are simply not worth repairing.

The value of your car is determined through market research. Three software providers provide vehicle valuations, Blue Book averages and what cars are selling for in your area through dealer networks.

Total loss formula: How insurers determine if a car is totaled

Generally, once the cost of repairs exceeds a certain percentage of a vehicle’s value, an insurer  will determine your vehicle to be a total economic loss and consider it totaled. 

However, state laws can also play a role in this process. These typically require that once damage exceeds a certain amount, a vehicle becomes subject to that state’s salvage title laws. These laws may have a specific total loss threshold or ratio that is a percentage of the vehicle’s market value. Or they could require the use of a total loss formula.

The total loss formula adds the cost of repairs to the vehicle’s salvage value. If the result is greater than the vehicle’s actual cash value, then it must be determined a total loss.

So, if the state’s total loss threshold is 75%, an insurer will declare a car totaled when the repair costs exceed 75% of the vehicle’s value.

Total loss laws by state

States are split in how they approach total loss laws. Just under half use the total loss formula to determine if a vehicle is subject to salvage title laws. The rest have a percentage threshold. These percentages range from 60% in Oklahoma to 100% in Colorado and Texas. 

Once the cost of repairs exceeds that percentage of a car’s value, the vehicle is considered a total loss. 

Total loss thresholds for each state

What happens when an insurer totals your car?

Obviously, it’s not the best news, especially if you like your vehicle. In general, here’s the process of what happens when you total your car:

The insurer will calculate the car’s actual cash value (ACV). The ACV is how much your vehicle is worth after factoring in depreciation. On average, vehicles depreciate more than 20% the first year and approximately 10% each additional year for the first five years, according to Erie Insurance reports using Carfax data.

After that, the insurance company will calculate an estimate of the car’s market value, based on the make, model and year, mileage, and condition, as well as the demand in your area for the type of vehicle you have.

Another factor used to estimate the car’s value is the resale value of the parts and the metal.

If the cost of repairs plus the scrap value equals or exceeds the ACV of your car before the accident, then it is totaled.

Optional car insurance coverages that help with a totaled car

You must have the right type of insurance to receive payment for a totaled car. With one exception, none of the following are required by law, but they can be beneficial if your car is a total loss.

• Collision and comprehensive insurance: Collision coverage will pay for damages when your vehicle collides with another vehicle or object. Comprehensive insurance will cover other types of losses, such as collisions with animals, vandalism or damage from storms.
• Gap insurance: Since cars depreciate quickly, you may find that the actual cash value of your car is less than what you owe on your vehicle. If your car is a total loss, gap insurance will cover the difference between what the insurance company pays and what you owe on your auto loan.
• New car replacement insurance: If you buy a new car and total it within a certain amount of time – usually no more than five years – your insurer will pay for a new car of the latest make and model if you have this optional coverage.
• Rental reimbursement auto insurance: You may need to rent a vehicle while waiting to replace your totaled car. However, your auto insurance policy won’t likely cover the expense unless you have opted into rental reimbursement coverage.
• Uninsured motorist coverage: Some states require uninsured motorist coverage, and this insurance will pay for damage to your vehicle should the at-fault driver be uninsured.  

Recommended car insurance coverage options for a totaled car

Case study: Real-life experiences with totaled cars

Let’s see how this works in two different real-life scenarios.

Madeline is a driver in Michigan who had full coverage on an older Toyota Camry. As she was driving, a vehicle did not see her and attempted to turn left into her lane. It hit her vehicle and crumbled the front end of the car, dislodging the bumper. No one was injured in the accident, but Madeline’s vehicle had to be towed.

An insurance adjuster inspected the vehicle and determined the damage to the vehicle, worth $3,500, a total loss. Madeline had a $1,000 deductible on her policy, but she was able to provide a police report indicating she was not at fault for the accident and her insurer waived the deductible.

Ruth wasn’t so fortunate, though. A North Carolina resident, she had opted to only purchase the minimum liability and uninsured motorist coverage required by her state. Her Ford Explorer was older and she had never been in an accident so she felt confident forgoing the additional coverage.

One evening, she became distracted, crossed over the centerline on the road and then overcorrected when she realized her mistake. The overcorrection took her off the road and flipped her vehicle into the ditch. Ruth was able to walk from the accident without any injuries, but her vehicle was a total loss. Unfortunately, she did not have collision coverage, so she received no payment from her insurance company.

Here’s a recap of each situation:

What if insurance wants to total my car but I want to keep it?

If you decide to accept the insurer’s decision to total your car but you still want to keep it, your insurer will pay you the actual cash value minus its salvage value and any deductible. It then will be up to you to arrange to make repairs to the car.

They will cut you a check and then you’re on your own.

Alternatives to keeping a totaled car

If you have a totaled car and don’t want to hand it over to the insurance company, here are some options:

• Selling to a salvage yard: You may want to sell the totaled vehicle directly to a salvage yard. This may involve obtaining a salvage certificate or title before making the sale.
• Donating the car: Some charities will take non-working vehicles, which they sell for salvage or scrap metal. By donating your car, you may be eligible for a tax deduction.
• Using insurance payout: If your insurance company has provided a payout for the damage, you could put that money toward the cost of vehicle repairs.

Pros and cons of keeping your totaled vehicle

Before you decide to hold onto your totaled vehicle, be sure to weigh the pros and cons.

Pros:

• The damage may be mainly cosmetic, and you may be able to negotiate an insurance settlement as well as keep the vehicle.
• It may be possible to repair the car with the insurance payout.
• If the vehicle is not repairable, there is the potential to earn more money by selling the car yourself.

Cons:

• The repairs could cost more than originally estimated.
• You will likely need a salvage title, which can make it difficult to sell or insure the vehicle.
• Keeping and disposing of a totaled car yourself can be more complex and time-consuming than handing it over to an insurer.

If my car is totaled can I still drive it?

Not immediately. To safely operate a totaled car, you will need to make major repairs. And remember, safety should be your primary concern when keeping a totaled car.

If damage to the totaled vehicle is mostly cosmetic, you may be able to fix it and drive it again for a modest cost. However, if fixing the car means reaching deep into your pockets, you may be better off letting it go.

There is a good reason why car insurance companies are cautious about fixing badly damaged cars. 

Cars are complicated. All damages are not visible. Once you start dismantling, often you find additional damage.

You should think twice about repairing and driving a car that has been seriously damaged. If the professionals who work for your automobile insurance company think the car is beyond repair for a reasonable cost, it probably is. Damage, such as cracks in frames or airbags, often can’t be seen by just looking at a vehicle.

What to do when your car is totaled and you still owe money 

If your vehicle is totaled and you still owe money on the loan, the insurer will reimburse your lender for the car’s worth (i.e. the actual cash value). Then, you must pay off any remaining balance if that amount is less than what you owe.

If you have gap insurance, it will compensate for the difference between what the vehicle is worth and what remains on your loan. Otherwise, you must keep making payments until the loan balance becomes zero.  

Finding car insurance for a totaled vehicle

You may run into trouble when you seek auto insurance for a totaled car. Your ability to buy collision and comprehensive coverage may be affected. It’s up to each individual company. Before you decide to fix your car, check to see if that is an issue.

Some insurers will not accept a car with “a branded title” because it shows them that it is a salvaged vehicle.

The federal government has established a database, the National Motor Vehicles Title Information System, to provide information to car shoppers. The insurance companies record all total losses. This provides consumers with a database to see if a car has been previously salvaged.

So, don’t count on being able to unload your vehicle on a buyer.