Has Your Car Been Written Off But You Still Owe Repayments? Here’s What You Can Do.
From late February through early March, rain bombs and severe floods brought devastation across South East Queensland and New South Whales. With thousands of homes flooded, many residents lost countless valuable possessions, including their cars.
If your car has been deemed a statutory write off by your insurance provider (meaning it isn’t considered to be worth repairing) but you still have a loan against it and owe repayments, you might be a bit confused about how to proceed.
For those who are currently in this situation, we’re here to offer some guidance and reduce your stress during this frustrating time. Read on to learn more about what you can do to get back on the road as soon as possible!
What is a statutory write off?
A statutory write-off is a car that is is so badly damaged that it can’t be repaired, or the costs to repair it exceed the car’s value.
Water and Cars Don’t Mix
When you realise how damaging floodwaters can be to cars, it makes sense why your insurance provider may have chosen to write your vehicle off and deem it a total loss.
Water can ruin various mechanical components of your car, from the transmission to the combustion system, as well as electrical components like the airbag computers. Floodwaters also tend to clog your cars with harmful silt and mud, both of which can cause serious damage to the upholstery and other components.
Is Your Car Covered by Insurance?
The answer to this question is a bit complicated (as is the case with most issues related to insurance).
First of all, most car lenders require borrowers to have comprehensive insurance. In theory, this insurance policy would cover the damage caused to the car by a flood and make it easy for you to replace your vehicle.
The problem, though, is that in a lot of cases, the insurance payout isn’t sufficient to cover the cost of the existing car loan and get the driver into a new vehicle.
When this happens, you may have to take out an additional loan to fund a new car and get back on the road. You might also have to go without a car altogether, at least for a while.
A statutory write-off is a car that is is so badly damaged that it can’t be repaired, or the costs to repair it exceed the car’s value.
Do You Still Owe Repayments on Your Car? Here Are Some Options
If your car has been written off by your insurance company but you still owe repayments on it, you may feel pretty devastated. Fortunately, you’re not completely out of luck.
The following are some options you may want to consider so you can move forward and start rebuilding your life after a disaster has struck:
1. Pay Off Your Loan
If you find out that your insurance policy does cover the full amount of the car loan, one option is to simply pay it off and start over again with a new car loan.
You can also put as much of the payout as you can toward the loan, then try to live without a car while you work to pay off the amount you still owe. Admittedly, this isn’t the most glamorous position to be in. It is still an option to keep in mind, though.
2. Challenge the Write-Off
Do you believe your car can be repaired, despite what your insurance provider thinks? If so, you may be able to challenge the write-off.
To succeed with this approach, you’ll first need to prove that your car can be repaired at an affordable cost. This will require a fair bit of research on your end, including getting quotes from mechanics, salvage yards, etc. You’ll also need the find evidence that backs up the market value of your car and proves that it is worth repairing.
It takes quite a bit of time and effort to successfully challenge a write-off. However, if you truly believe that your car can be salvaged, it may be worth it to put in that work to save your ride.
3. Apply for a Financial Hardship Variation
There is also the chance that your lender may be sympathetic to your situation, especially as you’re dealing a natural disaster like the recent floods. After all, you couldn’t have predicted that this kind of damage would happen to your car.
If you find yourself without a car but still having to pay off a loan, you may want to reach out to your lender and apply for a financial hardship variation. If your application is approved, your lender will allow you to make reduced payments because you’re going through a difficult financial challenge.
This guide from Legal Aid Queensland provides more insight into the specific requirements you’ll need to meet before you can qualify for a hardship variation. It also provides additional resources for those who need more guidance or information on their options.
Refinancing involves replacing your current car loan with a new one with a better interest rate.
4. Refinance Your Loan
Another option is to refinance your car loan.
Refinancing involves replacing your current car loan with a new one with a better interest rate. It allows you to reduce your loan payments, take advantage of competitive interest rates, and save money.
Here at Naked Loans, we are all about getting you on the road sooner rather than later. When you refinance your car loan through us, you’ll be able to move forward and purchase a new car much faster than you would have if you took one of the other approaches listed above.
Our team of experienced car loan brokers will compare loans from more than 30 lenders to help you find the most appropriate loan for your needs (some come with repayments as low as 3.7 per cent!). It’s free to apply, too, and it won’t affect your credit.
Final Thoughts
If you’ve been affected by the recent floods, you have our deepest sympathies. We know how challenging it can be to bounce back after a natural disaster like this, and it’s even harder when you don’t have access to a reliable vehicle and are struggling with bills piling up around you.
If you’re ready to put this mess behind you and get back on the road as quickly as you can, Naked Loans are here to help.
Reach out to us today and get help refinancing your loan in under 10 minutes.