What happens if your car is written off but not paid off?

If your vehicle is involved in an accident, it can be a stressful time.

The health and safety of the people involved in the accident is, of course, the priority. After that, the state of your vehicle and the amount of damage incurred is the next thing to worry about.

If your car is still under financing, it should be covered by comprehensive insurance, which gives you some peace of mind while dealing with the aftermath of the accident and what steps need to be taken next.

It is in your best interest to understand the processes involved after an accident so you can make informed decisions along the way. These include:

• recording the date, time and location of the accident (take photos on your phone, if you can);
• noting the make, model and licence plate numbers of the vehicles involved in the accident;
• collecting the personal details of the drivers, including their names, ID numbers and vehicle insurance details, if applicable;
• checking if there were witnesses to the accident, including passengers in the affected vehicles, and recording their contact details (in case there is a dispute regarding liability);
• reporting the accident at a police station to get a case number for insurance purposes;
• contacting your insurance company to advise them of the accident and submitting an accident report; and 
• once you have informed the insurance company, they will be in contact with you to take you through the next steps.

If, however, the damage to the car is extensive, with the repairs costing more than the value of your car, or if the vehicle is considered unsafe as a result of the accident, the insurer can instruct the car be written off.

“If your vehicle is financed and you are still paying it off when it is written off, you need to contact the financing company and inform them of the situation and discuss what your options are,” says Lebogang Gaoaketse, head of marketing and communication at WesBank.

“Technically, the car is still the property of the financier until your insurance company settles the claim and pays the outstanding financing amount owing on the vehicle to them.”

The insurance company will usually be liable to pay the insured amount of the car minus the applicable excess. Where there is outstanding finance, any payment will first be made to cover the outstanding finance amount. This may cover the exact amount or leave a shortfall depending on the insured amount and how much is owing on the vehicle.

The payout from the insurance company will largely depend on your policy and the excess payment (the amount you have to pay upfront when you make a claim), the amount you still owe to the finance company if your car is being financed and the depreciation value on your car due to wear and tear.

Once the payment has been made by the insurance company to the finance company, the written-off car will become the property of the insurance company — irrespective of whether there is an outstanding amount owed or not.

“If there is an outstanding amount owed by the customer to the finance company, this should be settled in full immediately. If the customer is not in a position to settle the account, we recommend the customer enter into a payment arrangement with the finance company on terms agreed to by both parties, depending on the customer’s affordability,” says Gaoaketse.

“It is important to understand the legalities under these circumstances so you are aware and informed as to who is responsible for settling the debt. Being involved in a car accident is stressful — the more you know about what to do after the accident and who to contact, the better off you will be when it comes to sorting out the car with your insurance company and settling outstanding debt with the financing house.”

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