Can I Buy a New Car With the Money From a Totaled Insurance Check?

If a car you own is totaled, you can typically spend the payout any way you wish.

If a car you own is totaled, you can typically spend the payout any way you wish.

After a serious accident, you may have a number of questions about your automobile insurance. If the company declares the car a total loss, for example, you may wonder what you can do with the insurance payout. Your options for spending these funds will vary depending on your individual situation.


After an accident, insurance companies employ a number of formulas to determine whether they should repair your car or declare it a total loss. According to a 2012 article on MSN, insurance companies base their calculations on the fair market value of the vehicle before the accident. Depending on the company’s policies, it may declare the vehicle a total loss if the cost of repairs exceed 80 percent of the vehicle’s value. In the insurance company’s eyes, it is less expensive to simply pay for the car than to repair it. Once the insurance company declares the vehicle a total loss, a company representative will present a check for the value of the car; in return, the company takes ownership of the vehicle. In many cases, it sells the vehicle to a junkyard.

Financed Vehicles

If you are making payments on your vehicle, or if it is leased, you may never see the insurance company’s check. Depending on the specific terms of your financing agreement and your insurance policy, the insurance company may make the check out to the financial institution that financed your vehicle and holds the deed. If the amount of the check exceeds the amount you owe, either the insurance company or the financier will forward you the remainder.

Owned Vehicles

If your vehicle is not financed, you will likely receive a settlement check from the insurance company. Once you receive this check, you may spend it any way you wish. Many drivers choose to use these funds to purchase another vehicle, though some prefer to invest the money or save it for future use. Depending on the value of your totaled car, you may receive a payout large enough to pay for a new car. If you receive a smaller check, though, you may use the funds as a down payment on a new car or as payment for a less expensive used vehicle.


In order to receive a payout when the insurance company declares your vehicle a total loss, you must typically carry comprehensive coverage. In most states, according to MSN, you may keep your totaled vehicle instead of buying a new one. If you choose to do so, the insurance company will typically deduct the salvage value of your car from the payment it issues. If the remaining payout is substantial enough, you may choose to use these funds to repair your vehicle yourself, purchase a used car, make a down payment or even buy a new vehicle.

About the Author

Keith Evans has been writing professionally since 1994 and now works from his office outside of Orlando. He has written for various print and online publications and wrote the book, "Appearances: The Art of Class." Evans holds a Bachelor of Arts in organizational communication from Rollins College and is pursuing a Master of Business Administration in strategic leadership from Andrew Jackson University.

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