How to Buy a New Car After a Total Loss


If you have a full coverage auto insurance policy, your insurance company will reimburse you for a new vehicle after a total loss accident.

Most insurance companies consider a vehicle totaled when the cost of repairs exceeds the vehicle’s value. A car can also be totaled if it cannot be safely repaired.

After you file the claim, your insurance company may take a few weeks or a few months to issue a payout, depending on whether you have a loan.

Once you receive the settlement, you can go out and buy a new car. Here’s what you need to know about buying a new car after a total loss.

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How is the value of the car determined?

One of the first steps an insurance company will take after a major accident is to find out the value of your car. Typically, a adjuster will look at the vehicle, determine if repairs can be done, and provide an estimate. During the inspection process, your adjuster will pay attention to:

  • The kilometers on your odometer.
  • The extent of the damage.
  • The condition of the body of the vehicle.

If repairs can be made, you will be reimbursed for the estimated repair costs, less your deductible. If the adjuster concludes that the car has been totaled, your payout will be calculated based on your car’s actual cash value (ACV). This figure is equal to the replacement cost value of your vehicle, less depreciation.

Is the insurance company buying you a new car?

If your car is totaled in a covered accident, you will receive money to buy a new one. However, the amount of money you will get depends on the type of insurance cover you have.

For example, if you have added new car replacement coverage as an endorsement to your policy, you will be able to purchase a new vehicle similar to your old one. Some companies also offer replacement cost coverage for an extra fee, which offers a larger payout in the event of a total loss claim.

If you don’t have these optional coverages, but you do have collision insurance, your insurance company will still give you money to replace your vehicle.

However, you will only be compensated based on the ACV of your car at the time of the accident, minus your deductible for collision insurance.

If you have a loan on the car, the insurance company is not obliged to pay it off. They will only give you what your car is worth, which can leave you in debt if you owe more on the loan than the vehicle is worth.

In this situation, gap insurance is beneficial. If your car is totaled, gap insurance pays the difference between what you still owe and the value of your vehicle. Gap insurance is an optional policy sold by most car insurance companies and some lenders.

What happens if you only have liability insurance?

Car insurance companies only provide compensation after a total loss accident if you have collision insurance, which is an optional coverage. If you have a minimum coverage policy with liability only insurance, you are not covered if you cause an accident and your car is totaled.

In this case, you will be responsible for the purchase of a new car completely out of your pocket. While no one thinks their car will be totaled, it is valuable to have a full coverage policy for this reason.

However, the situation is different if you are not responsible for the accident. If you have a minimum coverage policy and you are hit by another driver, their property damage liability insurance will provide some money to replace your car.

How quickly will you get your total loss check?

If you have a car loan, your insurance company will likely pay your lender directly. Remember – your lender technically owns the vehicle until you pay it off.

If your lender receives the check, the process can take up to several months, depending on the procedures of the insurance company and the lender. After the lender is paid, any remaining balance will come to you.

If you own the vehicle, the insurance check will be sent to you. This process usually takes several weeks. However, the exact time will depend on how your insurance company processes paperwork and payments. If the payment is made electronically, it may take less time.

Buying a new vehicle after a total loss

The process of purchasing a new vehicle after a total loss depends on whether you have a loan. If you’re still paying off a loan when the car is picked up, your lender will receive the money, and you can keep the rest.

Depending on the amount you receive, you may be able to put that money toward a new car and pay the rest with your savings.

If you own the vehicle, you will be able to spend your full settlement check on a new car. Once the money is in your account, you can go to the dealership, pick out a new vehicle and get the keys. Make sure you add the new car to your car insurance policy and keep proof of insurance in your vehicle.

Are you allowed to keep the car and repair it yourself?

Once a vehicle is declared a total loss, the insurance company will auction the vehicle off or sell it to a salvage yard, keeping the proceeds from the sale. Some states allow you to keep your totaled vehicle.

However, you are required to get an estimate of the fair market value of the salvage, which is then deducted from the final settlement you receive from the insurance company.

It is important to note that in many states, when you choose this option, your vehicle will have a salvage title. You are not allowed to register the car until all the repairs have been done and a new title has been applied for. Additionally, you may not be able to get collision or comprehensive insurance on a rebuilt salvage car.

Head shot by Elizabeth Rivelli

Finance & Insurance Editor

Elizabeth Rivelli is a freelance writer with over three years of experience covering personal finance and insurance. She has extensive knowledge of various lines of insurance, including auto insurance and property insurance. Her byline has appeared in dozens of online finance publications, such as The Balance, Investopedia,, Forbes and Bankrate.