Car Accident With Ongoing Financing: What Happens To My Car Loan?
Accidental damage to the financed vehicle. What next?
You were innocently involved in an accident? Then you can sit back for now:
The insurance company of the person who caused the accident must pay all costs incurred. It pays for repairs, loss of use, a rental car or the lawyer. However, the depreciation in value is problematic – your car will suffer this in any case. This plays a role in leasing at the latest when you have to return the car to the dealer.
What do I have to bear in mind if I have an accident with my leased car?
A problematic special case is depreciation. It becomes important if you have to return the leased car to the dealer – and the car no longer reaches the calculated residual value after the accident.
This is different with a newly leased car: the insurance of the person who caused the accident also covers the depreciation in value.
Prerequisite: The car is not older than five years and has run less than 100,000 kilometers.
The insurance then compensates the difference to the value the car had before the accident. It is not unusual for the loss in value to exceed the repair costs.
What happens to my uncommitted car loan?
In the event of a self-inflicted accident, you must inform your insurance company and your lending bank. Exception: If you finance your car with Credit company via an uncommitted car loan, for example, you do not need to inform the bank of the accident. In this case, non-earmarked means: Credit company has granted you a loan that is not linked to the vehicle. You are the owner of your car, as you did not have to hand over the vehicle title to Credit company when you took out the instalment credit. In the event of a claim, the monthly credit instalments simply continue to run.
Total loss for a earmarked car loan? What do I have to do?
Things become more complicated if you have financed the vehicle with an earmarked car loan: With this loan, the owner transfers the vehicle to the bank as collateral. The vehicle title is deposited permanently with the bank. If the vehicle suffers a total loss in an accident, the owner must deregister it. This is precisely why he needs the vehicle title from the bank. The bank will only issue the registration document against other credit security. But because the car has defaulted as collateral, the bank will cancel the loan and demand the money back within a period of time.
A good possibility is to negotiate with the bank about the rescheduling of the remaining debt into an instalment loan. In this way, you simply pay off the existing car loan and do not get bogged down in different loans.
Well secured with fully comprehensive insurance
With a fully comprehensive insurance, you will still get away well even in the event of a self-inflicted accident. The much cheaper partial coverage insurance is available for damage caused by theft, fire, glass breakage or forces of nature. But that is not enough. The fully comprehensive insurance regulates all damages of self-inflicted accidents, even those caused by vandalism. 12 to 18 months after the first registration, the fully comprehensive insurance even pays the complete new car price. If you have acted with gross negligence, insurers will refuse to pay. And the insurance company is also not responsible for the credit costs. This risk is borne by the owner of the vehicle.
What does a car accident mean for my 3-way financing?
If you bought your vehicle from a car dealer using 3-Way Financing, you must report the claim. This is especially true if you have contractually agreed to return the vehicle after the credit period has expired. Depending on the extent of the damage, the lending banks reserve the right to approve repair orders. If the vehicle is a total economic loss, the bank will refuse this. In the case of an accident vehicle, a significant difference to the calculated residual value is to be expected. As a borrower, you must take responsibility for this.
The car owner can reduce his loss by selling the car himself. Often he will get a better price than the dealer has calculated. Unfortunately, this does not work with every loan agreement. Even in the case of a total loss, this solution sometimes does not work. If the vehicle still has a high residual value, the sale of the vehicle is worthwhile for the owner. Often, however, the bank decides what should happen to the accident car.
What do I do if the bank terminates my loan?
As a rule, banks are interested in the continued existence of the loan agreements. However, if you have had an accident, you should inform your bank immediately. Untied instalment loans, such as those offered by Credit company, are exempt from the obligation to report.
If you still have a notice of termination in your hands, you should visit the bank together with your lawyer. Avoid a legal dispute – usually an amicable solution can be found in a discussion.