video calls availableFree Consultation
Get a Free Consultation
Florida Attorneys Karina Perez Ilić and Silvia Amador Brett sitting at table in front of red brick wall

What Happens When You Total a Financed Car?

Get a Free Consultation
Posted on January 25, 2024

It can be difficult enough to know how to pay to replace a totaled vehicle that you own as a car accident victim; if you wreck a financed car in Florida, you may be at a loss as to where to recover compensation for a replacement – and how to pay the remaining balance on your loan agreement. Gap insurance coverage can help in this situation.

When Is a Vehicle Considered Totaled?

A car insurance company will consider a vehicle totaled, or a “total loss,” when the cost to repair it is more than the car’s actual cash value. The threshold for deeming a car a total loss changes from state to state. In Florida, the threshold is 80 percent. This means if the cost of vehicle repairs is more than 80 percent of the car’s actual cash value, an insurance company will view it as a total loss.

If your financed car is deemed totaled, an insurance company will not pay for repairs; instead, it will give you an amount equivalent to the actual pre-crash value of the car. Unfortunately, if you do not own the vehicle outright, the compensation you receive will most likely be less than the amount remaining on your leasing or financing agreement. This is because motor vehicles lose value as soon as they are driven off the lot.

Who Pays to Replace a Totaled Financed Car?

Under Florida law, all drivers will seek financial benefits from their own car insurance companies, regardless of fault, unless their injuries are serious enough to meet the state’s tort threshold. Drivers are required to carry at least $10,000 in personal injury protection insurance for their medical bills and $10,000 in property damage liability insurance to cover others’ property repairs.

When you total a financed car, the amount of financial compensation you recover from an insurance company may not be sufficient to cover the remaining debt you owe on a financing agreement. Even if you were required to purchase collision and/or comprehensive insurance by the auto loan provider, the amount you qualify for would not match the value remaining on your loan.

Car insurance companies do not base payments on how much a claimant still owes on a loan; they are only willing to pay the vehicle’s actual cash value at the time of the crash. This can leave a difference of thousands of dollars that you may be responsible for paying out of pocket – even if the car is totaled and can no longer be driven. The loan company will still require you to pay off your remaining balance.

What Is Gap Insurance?

Gap insurance – short for Guaranteed Asset Protection – can help you cover the gap between the actual cash value of a financed vehicle as determined by an insurance company and the amount remaining on your financing agreement. Many vehicle loan and leasing companies require drivers to carry gap insurance on their policies. If it is not a requirement, you should still consider purchasing this type of insurance to avoid getting stuck paying off a loan out of pocket.

Other Legal Options

If you do not have gap insurance, you may have other options available for paying off a financed car that gets totaled in an accident. You may have the right to hold the other driver financially responsible, for instance, if a third-party claim is available. You could potentially sue the at-fault driver to recover the full cost of your remaining debt on a financed car. You may also have grounds to bring a case against another party, such as an employer, company, the government or a car part manufacturer.

If you were in a crash that totaled a financed vehicle, discuss your legal options with a Tampa car accident attorney at Vanguard Attorneys. We can help you seek full and fair compensation for your losses.