What Happens When Your Car is Totaled & You Still Owe Money?

Accidents can happen at any time. It could be after you’ve owned your vehicle for a decade and it’s on its last trip around the block. It might be the day after you’ve made your last car payment. Or, your car could be totaled while you still owe money on it.

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No doubt, it’s no fun at all when you have to figure out what to do after a car accident when you’re still making payments. There are a few ways it can go depending on what stage you’re at in car ownership.

What Happens When Your Car is Totaled and You Still Owe?

Knowing what to do with a car that still has financing when it’s totaled isn’t always clear. It all depends on how much you owe versus the car’s value prior to the accident.

When your car is totaled and your insurance company is settling your claim, the lender is the first party to get paid out. They’ve put a lien on your vehicle that entitles them to money first. If anything is left after the lien is paid off, you’ll get the balance. You could be in one of three situations based on your equity position.

Positive Equity

When your car is worth more than the balance remaining on your car loan, you’re in a position of positive equity. When your car is deemed totaled, the lender pays your bank loan off from the payout value, then the rest ends up in your coffers. You can do with it what you like – take a trip, put it all on red at the casino, or use it as a down payment on your next car.

Negative Equity

If your car’s value is less than the amount you still owe the lender, it’s in the tough position of negative equity. Once you’ve settled on a value with the insurance company, they pay out your insurance company first. Since there’s nothing left once they’ve been paid, you get no cash for yourself. Worse yet, there’s an excellent chance you still have a balance owing, and you don’t own the car you still have to make payments on!

GAP Insurance

When you’re buying a car in a negative equity position, GAP insurance can be a truly wonderful thing. Should your car be totaled while you have negative equity, GAP insurance pays the balance left owing after the insurance company has paid out the claim. GAP insurance usually has a limitation on its value it will pay out, so there could still be a portion you have to pay for yourself in the end.

What to Do After a Car Accident

When you’ve been in a collision, there are a few steps you should always take immediately after.

  • First, make sure everyone is okay. People are the most important component in an accident, so look after everyone’s health and wellbeing primarily.
  • Call the authorities. If anyone needs medical attention, call 911 to request assistance. If everyone is alright (although it’s normal to be shaken up), call the police non-emergency line to report the accident.
  • Call your insurance agent. The sooner you can start the insurance process, the better. It’s beneficial to call in the collision while you’re still at the scene if you can. That way, the agent can make sure you get the right information and even help you capture pictures of the scene.

What to Do with a Totaled Car

After your accident, you’ll have a totaled car to deal with. Maybe you can still drive it home, or maybe not. You’ll have a few decisions to make.

Decline a Claim and Keep the Car

Do you have a pretty rough driving record? You might be concerned about your insurance rates and penalties more than the cost to replace your car. If that’s the case, you can settle apart from your insurance and keep your car. It’s also an option if you’re in a negative equity situation.

In this situation, you’ll have a car you may not be able to drive without extensive repairs. It’s not an ideal place to be.

File a Claim and Give Up the Car

Go through with an insurance claim where your car is deemed a total loss. In most claims, the insurance company will pay you out for your car’s value minus what the lender is owed.

After the claim is settled, you’ll be paid for your car and the insurance company will take possession of your totaled vehicle.

File a Claim and Keep Your Car

Even if your car is deemed a total loss, you might be able to keep it. When you settle with the insurance company on a value, you can request to keep the car. If that’s the case, you’ll get the damaged car back along with the insurance claim’s value minus its assessed damaged value. You could get your car back, albeit crashed, along with a check.

Totaled Car Insurance Payout

If you’ve been through an accident and your damaged car is still in your possession, you can sell it online. At WeBuyTotaledCars, you can sell a totaled car quick and easy.

Request a no-obligation offer online and receive a guaranteed offer within about 90 seconds. Once you accept the offer, we’ll pay you in about 24 to 48 hours. Only once you’ve been paid will we pick up your vehicle from where it sits, and at no cost to you. It’s the fast, simple method to sell totaled cars for a fair price!

It’s a Quick and Easy Process


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Answer a few quick questions and provide a picture if you can.



In less than two minutes, you’ll have a guaranteed offer.



Accept the offer if you’re happy with it.


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Within 24-48 hours, we will tow your car for FREE and pay you on the spot!

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