PROPERTY DAMAGE TO YOUR AUTO: REPAIR, TRADE OR TOTAL?
MINOR DAMAGE: A daily question we hear in my office regards damage to their automobile from an auto accident. Clients worry the insurance company will not repair their car to the same condition it was prior to the accident. This is of special concern when the client is driving a fairly new car. I usually have to discuss with them the whole procedure of how to handle the property damage claim. If the damage is minor, the value determined by the insurance company is often less than the estimate from the local body shop or dealer, and the insurance company does not want to pay the difference. I usually suggest the client take a very strong position with the insurance company and insist the repairs be done in such a way that the car does not appear to have ever been damaged; additionally, the client should insist that the insurance company pay all the cost of repair regardless of their estimate. When there is damage to an auto that has been purchased within the last four years, I recommend it should be repaired at the dealership where the auto was purchased, or a local respected body shop. The dealer or body shop should argue vehemently for the best work to be performed to the auto regardless of the amount the insurance company might be first willing to pay.
DIMINISHED VALUE: Another major question asked is what about the loss of the value of the car after it has been involved in an auto accident? Once the car is repaired after the auto accident what about the loss of the value of the car? When the car is traded in, the dealer will know it has been in an accident. Don't kid yourself into thinking the dealer will not know. They use resources like Carfax (www.Carfax.com), a website that records the history of the car. Also, most experienced car salesmen will know the subtle changes non-factory repairs will have on the automobile. The dealer will therefore depreciate the car at the time of trade in. This depreciated amount can be substantial! If Carfax reflects extensive repairs, even if the car looks new, there will be a reduction of the value for the damage. The question then is, shouldn't the insurance company pay the difference in the value of the car called the diminished value? In the State of Florida, your insurance company, or the insurance company of the person who caused the damage, is not responsible for the diminished value of the car. This may vary in different states, but in Florida, this insurance company is not responsible. This rule applies even if the car is only a few weeks old, but has been in an accident, and repaired to "as new" condition. When the car is traded in, you will face a disheartening diminished value appraisal of the car. At this time, unfortunately, in the State of Florida there is nothing you can do about this.
SUBSTANTIAL DAMAGE: When there has been substantial damage to a fairly new car, I am often told by the client they do not want the car back. They want the insurance company to total the car (do not repair the car, just pay the current value). The insurance company will not total the car unless the cost of repair exceeds 80% of the value of the car. In many cases, the repair cost may be borderline, and the question is how can you get the insurance company to total the car? When the car is totaled, you will not be getting the full value of the car you purchased. You will be getting much less. If there has been a trade in or substantial down payment, you may lose a large portion of it. Remember then, if the car is totaled, you will only receive the value of the car as its sits today. The insurance company will deduct any wear and tear, and prior damage, so you may end up in a situation where the loss to you may be substantial.
If there has been substantial damage (but the auto is not totaled) to your auto, and it is at a dealership, then you might ask the sales manager to take your car in trade on another car and offer to give them the insurance check for the damages to the automobile. When the dealership gives you an estimate to repair the car, they are giving you a price based on their cost at retail rates. They may be willing to take your damaged car, because the dealer's cost of repair will be less. It may be to the dealer's benefit, and yours, to trade the damaged car, give the dealer the insurance proceeds, and get a new car.
Get rid of a car that has incurred substantial damage ($5,000 to $6,000 repair costs)! Trust me, no matter how well the car is repaired, you will never be happy with it. Everything that goes wrong with the car will always be thought to be caused by the accident, even if it is not true.
CAR LOANS: I should point out, that for most people who finance a car, from the time you drive the car off the lot, you owe more money that the car is actually worth. The expression uses is that you are "upside down" on the car. If the insurance company "totals" your auto, it does not take into account the amount owed on the car, only the "value" of the car. If you owe $2,000 - $3,000 more on the car than the insurance company pays, you may be negotiating with the finance company for terms to payoff this excess amount on a monthly basis. Note: you may want to ask about "GAP" insurance the next time you purchase an automobile. GAP insurance pays the difference between the value of your automobile and the actual amount you owe.
Regardless of the amount you owe, if there is a lien on your automobile, you will not be the only payee on the check for the damage or total of the car; the lien holder will also be on the check. You will have to take the check to the bank or finance company where they will ask you to endorse the check and hand it over to them.
Please note: The law constantly changes, and you can't be 100% confident in the information provided above, but feel free to call our offices with any questions.
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