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What happens if my car is written off and it’s on finance?

If your car has been in an accident and is damaged beyond repair, it might be ‘written off’ by the insurance company

Car finance

What is an insurance write-off?

An insurance write-off is a phrase used to describe cars that are damaged beyond repair or will cost more than the value of the car to fix. The term used by insurers is Beyond Economical Repair (BER).

If your car is so badly damaged that it’s written off, your insurance company will take a look and decide what category your write off fits into.

There are a number of categories that explain the type of damage that has been done to the vehicle:

  • Category A write-offs are for cars that must be scrapped, as the damage is beyond repair.

  • Category B is for vehicles that are still beyond safe repair, but some parts can be reused or recycled.

  • Category C is for vehicles that can be repaired but that would cost more than the vehicle’s worth to do so.

  • Category D is for vehicles that can be repaired and would cost less than the vehicle’s worth, but other costs (such as transporting your vehicle) take it over the vehicle’s value.

  • Category S is for vehicles that can be repaired following structural damage.

  • Category N is for cars that can be repaired following non-structural damage.

The full list of categories can be found on the gov.uk website.

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What happens if you write off a car on finance?

Getting into an accident and having your car written off is a nightmare for most people, but even more so if you have outstanding finance.

If the car is a write-off, it remains the property of the finance company until the finance has been settled.

The insurance company will usually have a liability to pay the pre-accident market value minus any excesses.

Where there is outstanding finance, any payment will be first made toward outstanding finance.

This could cover the exact amount, leave a shortfall, or sometimes mean there is money left over for the customer.

Once the payment has been made by the insurance company, as long as there’s no outstanding finance, it would become the property of the insurer.

What should I do if my finance car is written off?

When you make an insurance claim because your vehicle is damaged, your insurance company will decide whether your vehicle is being written off and then tell you how much it will pay you.

You should also contact your lender as soon as possible and let it know what’s happened. It’ll be able to let you know what your options are.

If the car is a write-off, the car remains the property of the finance company until the finance has been settled.

The insurance company will usually have a liability to pay the pre-accident market value minus any excesses.

Where there is outstanding finance, any payment will be first made toward outstanding finance.

This could cover the exact amount, leave a shortfall, or sometimes mean there is money left over for the customer.

Once the payment has been made by the insurance company, as long as there’s no outstanding finance, it would become the property of the insurer.

Your insurer will usually deal with getting the vehicle scrapped for you.

Make sure you tell the DVLA your vehicle has been written off – you can be fined £1,000 if you don’t.

What can I do if my finance car is written off?

If your car is written-off, have a conversation with your insurance company – they’ll talk you through what happens next.

Do I still have to pay my car finance if the vehicle is written off?

Unless you’ve cleared the balance of your finance deal with your lender, you’ll still need to keep up with your finance payments.

Missing payments and not informing your lender of what’s happening with the car can only make things worse – it's important to be honest and keep your end of the bargain to get the best possible outcome.

Damaged your finance car, but not quite written it off? Find out what happens if you damage a car on finance here.

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