Totaled Car: Everything You Need to Know

For most people, a totaled car means one that's wrecked beyond repair. While this is sometimes the case, a totaled car could still be operational but not worth the cost for the insurance company to repair it. You may have the option to repair it yourself, but should question whether it's worth it to repair a totaled car.

Read on to get answers to your questions about totaled cars and learn what comes next if your car has been declared totaled.

What is a Totaled Car?

A totaled car is one that can't be repaired cost effectively or is beyond repair. Usually, money is the key ingredient: if the repairs generally exceed the actual cash value (ACV) of the vehicle, it’s totaled. These standards, however, are set by insurance companies and state law essentially labeling a damaged car as not worth fixing by the insurance company.

But as a car owner, you may elect to repair a totaled car for emotional or financial reasons.

A Total Loss

If an insurance company considers your car’s damages and finds that it cannot be safely repaired to the point of being road ready again, it’s a total loss. Secondly, if your car’s damages can be repaired but cost more than the assessed value (ACV) of the car itself, it will be considered a total loss.

The basic idea is if the cost of the repairs plus labor exceed a certain threshold, the car is not worth fixing for the insurance company. All insurance companies use a total loss formula (TLF) that will help them decide the outcome. Finally, your state’s laws may require your insurance company to declare your car totaled- whether it can be safely repaired or not. State laws will typically require this due to certain types of damages sustained and, or a certain threshold written into law.

Calculating Damages

In order to declare your car as a total loss, an insurance company must assess it for damages. Here's what your insurance company will consider when evaluating your car's repairability: 

Your Car’s Actual Cash Value (ACV)

A car’s actual cash value is your car’s total value after considering depreciation. According to Carfax, cars decrease in value around 20% within the first year and 10% each following year for a total of five years. Each insurance company has their own way of calculating a car’s actual cash value, so it may vary from one provider to the next. Once your car’s actual cash value has been calculated, it will then be compared with the cost of the damages your car has sustained.

Total Loss Value

To calculate your car’s total loss value, insurance companies consider make, model, total mileage, and level of wear and tear. Obviously in the case of new cars, you’re much more likely to receive a higher actual cash value than an old, run-down car. In fact, new cars are always considered fixable unless the damage is incredibly severe. Older cars, on the other hand, are typically considered not worth fixing with very little damage- resulting in a total loss declaration.

How the Price of Parts and Repair Factor In

Insurance companies rarely consider a car fixable if the cost of labor and repairs exceed 51% to 75% of the car’s total value. This makes the likelihood of an older car being declared a total loss much higher than a newer car as it inherently possesses a much lower value.

Factors including make and model will also have a lot to do with the costs of parts and repair. Older cars tend to be more costly to repair as they require older parts that may not be found easily. This doesn’t necessarily mean that you should expect a total loss declaration just because your car is older, but your chances are considerably higher.

Car Damages That May Result in a “Total Loss”

While it may seem like common knowledge, there are several different forms of damages that will typically mean a total loss declaration including:

• Extensive hail damage
• Fire damage
• Flood damage
• Deployed airbags
• Extensive damage to the engine bay
• “T-bone” collision or severe crumpling of the body/frame

What to Do if Your Car Is Totaled

Now that your car has been declared totaled, you have two choices. You can either accept the cash settlement of your car’s actual cash value or you can “retain the salvage” if your state allows. If your state allows you to retain the salvage, you’ll be able to request that the title and damage vehicle be returned to you to do as you like. In this way, you can either choose to repair the car yourself or sell it for parts.

Most often, people will choose to take the settlement of their car’s actual cash value. If you owned your car, the payment will go to you and if you were leasing the car, the payment will be given to the lienholder of the vehicle. If any money remains after paying the lien holder in full, you may be awarded the remainder.

What Are Common Fixable Types of Damage?

Car damage is only considered irreparable if the damage is severe, or if the costs of repair is 51% or higher than the vehicle’s value. Of course, there are many types of damages that are common in minor car accidents that can be easily repaired. A few of these types of damages include:

• Minor dents
• Minor scratches
• Front bumper damage
• Broken headlights
• Car grille damage
• Wheel damage

Each of these types of damages vary in costs and it should not be assumed that they are all inexpensive by any means, but they are almost always fixable. There are also rarely the cases of damages that land a car with a total loss declaration unless it is an older car with a low actual cash value.

What Happens to a Car That is Totaled?

What happens to a car after it is totaled depends largely upon the car’s age, whether it was owned or financed, and the severity of the damage. While many totaled cars end up in the salvage yard, you may be able to keep it and attempt to repair it yourself. Although, you should be absolutely sure whether it’s worth it.

In most jurisdictions, a car that is labeled a “total loss” by an insurance company will then have its title branded as salvage. Once this is the case, your insurance company will then auction the car off as salvage. If it’s your intention to keep the car to make your own repairs, there are a few different things you should consider:

The Cost of Repair

Before you get in too deep with attempting to repair your totaled car, consider how much these repairs will cost. If your insurance company has labeled it a total loss, it’s either because the cost of repair is higher than the price of the car or because of the severity of the damage. In either case, it’s likely that taking on the repairs yourself will be incredibly expensive.

Ask yourself if you have the technical and mechanical knowledge to successfully repair the damage. If you do possess the skills, you may be able to restore the vehicle for much less than your average car owner. If you don’t have the skills to repair the totaled vehicle yourself, you’ll have to find a mechanic and, or collision specialist and it is very likely their services won’t come cheap.

When it comes to mechanical and auto body collision, the jobs can be difficult when you need equipment that isn’t accessible to you. Swapping an engine, transmission, dealing with electrical issues, pulling a car frame, and welding can be difficult and extremely time consuming. However, if you are just installing bolt-on parts, whether it’s in the engine bay or on the body, the job is very doable.

Can the Car Pass Inspection?

For your totaled car to pass a state inspection after being repaired, you’ll have to get your state’s department of motor vehicles to approve of a rebranding of the title from “salvaged” to “rebuilt." This can be very difficult in the case of a totaled car (depending on the damages) and if you can’t gain approval, your car won’t be allowed on publicly owned roads, resulting in a waste of some serious cash.

Insurance

You’ll also be tasked with convincing an insurance provider to insure your rebuilt vehicle and may pay more to do so. Most (but not necessarily all) insurance companies are extremely reluctant to insure a car that once possessed a salvaged title and had been declared a total loss.

Financing

If you were financing your car and have yet to pay it off, you don’t get to decide whether the totaled vehicle is returned to your possession. This will instead be left completely up to the financial institution with which you currently hold a car loan.

Can a Totaled Car Be Re-Sold?

Once your totaled car possesses a salvaged title, it can be sold. The easiest way to sell a totaled car is to take it to a car dealership as you can sell it directly for cash. Many car dealerships are in the business of buying salvage vehicles and will do so for a variety of purposes, be it for re-sale or as an auction for auto body parts.

If you elect to instead attempt to sell your totaled car to a private party, you should expect a bit more difficulty. Since salvaged titles incur higher insurance costs, reselling your totaled car will likely be a tough sale. If neither of these options pan out in your case, it’s always an option to sell your totaled car to a salvage yard for scraps or auto body parts. You can also donate your vehicle and gain a special tax credit.