Take The Money And Run: Should You Junk After An Accident?
Posted on: 9 December 2020
If you've recently been in an accident with your car, then you may be wondering about the next steps to take. In most cases, you'll receive a payout from your insurance company or the other driver's insurance company. The purpose of this money is to "make you whole," but you are typically not legally obligated to use it for repairs or any other specific purpose.
Of course, you probably need your vehicle, so does it ever make sense to take the money and run? Surprisingly, the answer is "yes." An insurance payout plus the value of scrapping an old car may be the financially superior move to make. The following questions will help you to understand if this is the right strategy for you.
Can You Legally Take the Money?
There are some limited circumstances where you cannot take your insurance settlement and ditch your old car. If you currently have a loan on your vehicle, then you'll most likely need to repair the damage and may not even have direct access to the settlement check. The best way to understand your rights in these circumstances is to stay in contact with both your lender and insurance company.
How Bad Is the Damage?
If the damage to your car is severe enough, then you only have two options: keep the money and get rid of the vehicle, or use the funds to repair the damage. In general, you should not continue to drive any car with more than minor cosmetic damage. Modern vehicles use unibody construction, which means that most body panels also form critical structural elements.
How Much Is the Car Worth?
Consider the value of your vehicle before the accident. If you drive an older or less desirable car, severe accident damage may reduce its resale value well below its scrap value. Insurance companies don't all use the same formula to determine when to total a car, so they may settle for repairs even if the damage is 80% or more of your car's potential resale value.
In these cases, repairing your car makes very little financial sense. Since your settlement money will be very close to the cost of replacing the vehicle outright, it's often a better decision to use that money towards a replacement.
What's Your Scrap Value?
Finally, call a few salvage yards, like U Pull & Pay, and attempt to get a rough estimate of your vehicle's scrap value. Is your settlement money plus the scrap value of your damaged car enough to replace it with an equivalent or better vehicle? If so, taking this approach has the potential to leave you with a better, more reliable vehicle than using your settlement cash to repair your old car.
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