What happens if my car is written off and it’s on finance?
Alisa Dan
If your car is written off while it’s still on finance, the finance agreement remains in place until the full balance is cleared. The car may be gone, but the debt isn’t.
After a write-off, your insurer values the car based on its market value before the incident and issues an insurance payout. This payment goes straight to the finance company, as they’re the legal owner until the agreement ends. The money is used to reduce or settle the outstanding finance.
If the payout equals or exceeds the settlement figure, the loan is cleared. If it’s less, you’re responsible for paying the remaining amount—this shortfall arises because cars lose value quickly through depreciation. On rare occasions, if the payout is higher than what you owe, the lender returns the surplus to you.
Some drivers take out GAP insurance to cover any shortfall, ensuring the finance is settled even if the insurer’s payment falls short. Otherwise, you must pay the difference yourself.
What should I do if my finance car is written off?
If your finance car is written off, contact both your insurer and lender straight away. The insurer will assess the damage, confirm the car as a total loss, and calculate its market value before the accident. That figure determines the insurance payout, which usually goes directly to the finance company, since they legally own the car until the agreement is cleared.
Ask your lender for the settlement figure. If the insurer’s payout covers that amount, the agreement ends. If it falls short, you must pay the remaining balance yourself. This shortfall happens because cars lose value quickly through depreciation. If the payout is higher than what you owe, which is rare, the lender returns the surplus to you.
If you hold GAP insurance, notify your provider immediately. It can cover the difference between the insurance payout and the settlement figure, preventing any out-of-pocket costs. Until all payments are cleared, continue your regular instalments or confirm with the lender that the finance account is settled.
Do I still need to make monthly finance payments if my car is written off?
If your car is written off, don’t stop your finance payments until your lender confirms the balance is cleared. The finance agreement remains active until the insurance payout reaches the lender and the account is officially closed.
If any amount remains unpaid, you’ll need to cover it or discuss repayment options with your lender. Stopping payments too early could affect your credit record, so wait for written confirmation that your agreement has ended.
What are my options if my financed car is a write-off?
1. Clear the outstanding balance
Your insurer’s payment usually goes to the finance company. If it covers the settlement figure, the agreement ends. If it doesn’t, you can pay the remainder yourself or use GAP insurance to close the gap. Once the account is settled, you’re free from further finance obligations.
2. Buy the car back and repair it
For repairable write-offs like Category S or Category N, the insurer may let you buy the car back. You can then repair it privately and return it to the road, provided the lender agrees. The finance still needs to be cleared, so you’ll either continue payments or use part of the insurance payout toward repairs.
3. Use insurance payout to buy a new car and keep paying your finance
If your insurer’s payment leaves you with funds after the finance is settled, you can use that money as a deposit for another vehicle. In some cases, the lender might allow you to transfer your finance to a replacement car, though this depends on your agreement and credit status.