Crashed Car On Finance
Car Crashed on Finance

What Happens If You Crash Your Car On Finance?

Going through an insurance claim can pose many challenges, the process can feel very complicated. You’ll be receiving countless phone calls and dealing with many different people. This article will explain what happens if you crash your car on finance.

Knowing Your Finance Agreement

How and when your finance company will be involved depends largely on the type of finance you have on your vehicle. Looking at your finance agreement documents will explain what type you have. Yours will be one of the 3 arrangements:

Will My Car Be Written Off
HP - Hire Purchase

HP allows you to pay for a car in instalments over a set period of time. You’ll typically pay a deposit, then pay toward owning a portion of the car each month. At the end, you will own the car outright after paying a small final fee. Although you do not technically own the car until the final payment is made.

PCP - Personal Contract Purchase

PCP finance splits the price of the car into affordable chunks; a deposit, monthly payments, and an optional final payment, otherwise known as a balloon payment. This final payment to own the car is much larger than with an HP agreement, as your monthly payments are designed to only to cover the vehicles value depreciation and the lenders interest rate.

Lease

Leasing a car is no different from leasing, or renting, anything else. After agreeing how many miles you will drive each year, you’ll pay a fixed monthly amount to rent your vehicle, often with a larger initial payment to act as the deposit. Once your contract ends, your vehicle automatically returns to the leasing company, without an option for you to keep it.

What Your Finance Means For Your Claim

If your vehicle is going to be written-off, your insurer may make contact with your finance company during the insurance claims process. They do this to find out how much it will cost to close the finance on your car, this is often called a “settlement figure”, but don’t get confused with the insurance “settlement figure” which is the amount your insurer will payout for your accident.

The finance company settlement figure is a sum of:
  1. The outstanding balance of finance on your vehicle
  2. Any early repayment charges
  3. Minus the future interest that doesn’t need to be paid, since you’re closing early.

Once your insurer has decided how much to pay you for your accident claim, they may arrange to settle the finance companies interest first, and give you whatever amount is left over from that. If not, they may pay you the whole amount, and instruct you to make settlement with the finance company yourself. It’s very important you do this promptly, as otherwise you could be in breach of your contract with the finance company, and penalised for it.

Owing More Than The Car's Worth!

There may be some circumstances where the amount your finance company is owed, is greater than the amount your insurance company will payout. If you have gap insurance, then don’t worry! They will cover this shortfall. If you don’t, then you will be required to pay the remaining balance from your own pocket! For more information on what happens during the insurance claims process after this, read our A-Z guide on managing insurance claims

Getting The Most From Your Claim

Car Finance Crash Insurance

Whether you end up paying out from your own pocket to cover the finance balance or not, it pays to get the absolute maximum that you can from your insurance claim. There are two ways to go about this:

  1. Make sure your insurer has valued your car correctly
  2. Use CarCrashProfit’s Payout Booster Tool™ to increase your total payout.

Making sure your insurer has valued your car correctly is very important, as the payout figure you receive, is to pay for a “like-for-like replacement of your vehicle, in the area in which you live.” The easiest way to get an accurate valuation is entering your registration to the system for a free instant valuation.

Once you’ve entered your details, you’ll also see how much extra you could earn by using the payout booster tool™. Uniquely the service can buy-back back your write-off from your insurer and give you extra profit for it, even if it’s on finance. Just follow a few simple-steps that are explained along the way and you could be earning up to £2000 extra.

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