With the vast number of cars on the road nowadays, collisions are sometimes unavoidable. Apart from the risk of injury, there's also the inconvenience of being without a car while it's being repaired  and the difficulty of dealing with insurance providers. 

So, what happens if your car is written off while on finance? And what if it's not your fault? In this article, we’ll discuss insurance write-offs and all the different types, along with examining each scenario so you know what to do should the worst happen. 

What happens if your car is written off while paying finance? 

If your car is written off while you are still paying finance, the outcome can depend on the type of finance agreement you have. With a personal contract purchase (PCP) agreement, in which you do not own the vehicle. Well, until the end of the finance term. The vehicle will typically be returned to the financing institution. 

You will still be responsible for making the monthly finance payments until the end of the agreement. Any payout from the insurance company will be used to pay off the outstanding finance. 

​​If your car is written off while you are still paying finance, you will need to go through your insurance company to cover the cost of repairs. You may be able to dispute the value of the write-off. Or, convince the insurer that the value of the car is worth repairing. 

If successful, this can mean paying for repairs yourself. Alternatively, you can buy the car back and repair it. Other options include clearing the outstanding balance on your finance agreement or buying a new car with the insurance money. 

If you have a hire purchase (HP) agreement, in which you own the vehicle from the start of the finance term, the insurance payout will go to you, and you will be responsible for paying off any outstanding finance. In either case, it's important to speak with your financing institution and insurance company to understand your situation.

Related Reading: How does car loan refinancing work?

What happens if you crash a PCP car? 

If you crash a car that you are leasing under a Personal Contract Purchase (PCP) agreement, the process is similar to crashing a car that you are still paying finance on. The procedure for determining whether or not your car is an insurance write-off will remain the same. If so, you will be presented with a settlement amount based on the car's value prior to the accident. 

What happens, though, if you damage a PCP vehicle but the insurance settlement amount is insufficient to pay off your existing debt? You will, regrettably, be left with a shortfall and be required to make the remaining finance repayments. 

If my car is written off what happens to my insurance? 

If your car is written off, your insurance policy will still be in effect. You will also still need to pay any remaining premium. However, the policy will be adjusted to reflect the fact that your car is no longer driveable. If you had comprehensive coverage, your insurance company will pay out the value of the vehicle, minus any policy excess. 

Depending on the terms of your policy, you may be able to use the payout to purchase a new vehicle. But, you will need to take out a new insurance policy for the replacement vehicle. It's important to speak with your insurance company to understand your situation. 

Do you still need to make monthly finance payments if your car is written off? 

Even if your car is written off, you will still need to make any remaining monthly finance payments. You must do this until the finance agreement is settled. It is important to review the terms of your finance agreement to understand your obligations in this situation. 

What should you do once your car is written off? 

If your car is written off, you should contact your insurance company to begin the claim process. They will provide you with instructions on how to proceed. While also beginning the process of assessing the damage and determining the payout. 

After that, you should inform the finance company about the write-off and follow their process. You may also wish to consider purchasing a replacement vehicle. You can do this either by continuing with the finance or lease agreement or by purchasing a new car outright. 

Generally speaking, whether your car is a Category S or Category N write-off, you have one of two options: 

1. Purchase a new vehicle using the insurance proceeds. Once you've completed this, you'll carry on paying the finance as normal. 
2. You can pay for the repairs yourself after buying your car back. 

What is an insurance write-off? 

An insurance write-off, also known as a total loss, is a determination made by an insurance company that the cost to repair a vehicle following an accident is greater than the value of the vehicle. In other words, the vehicle is deemed beyond repair and not worth fixing. 

When an insurance company writes off a car, it is usually due to one of three reasons: 

• The vehicle is scrapped since it is too badly damaged and deemed unsafe to be driven again. 
• The vehicle is still safe to drive but can't be fixed at a reasonable price. In this situation, the insurance provider might sell the vehicle. 
• Despite minor damage, the car's repair expenses are higher than its market value. The insurance provider may sell the vehicle in this situation. 

If your vehicle isn’t safe, you will be compensated financially. However, an uneconomical repair is determined by a repair-to-value ratio. This can vary depending on the insurance provider and the vehicle. 

Vehicle assessors are used by auto insurance companies to determine the cost of repairs and reach this conclusion. They will examine your car's general condition and any crash damage. 

As a result, if your car is worth £10,000 and your insurance carrier uses a 60% repair-to-value ratio, the car will be deemed beyond economic repair if the required maintenance costs more than £6,000. 

If you have a big repair bill that can’t be funded by insurance, split the car repair into interest-free monthly instalments. With Bumper, you can apply for a credit limit of up to £5,000 and see a list of local dependable garages near you.

Are there different kinds of car write-offs? 

To determine the severity of accident damage, auto insurance assessors employ a variety of write-off categories. The four classifications used up to October 1, 2017, were A, B, C, and D, with the severity of the damage descending by category starting with A. 

After consideration, the ABI revised the salvage rule. They did this to emphasise structural problems that compromise safety rather than just the expense of repairs. These days, the categories are A, B, S, and N. 

Category A (Scrap Only) 

Cars that are so severely damaged ought to be crushed and never be seen again on the road. Even parts that can be salvaged must be destroyed. 

Category B (Break for Parts) 

Crushing the body shell is required. Despite some pieces being salvageable, there has been considerable damage. The car should never be driven again. Although salvaged pieces can be put to use in other vehicles that go on roads. 

Category S (Structurally Damaged but Repairable) 

This might involve a chassis that has been twisted or bent or a crumple zone that has collapsed during a collision. Because Category S damage goes beyond mere cosmetic issues, a professional repair is required. Until the repair is complete, driving won't be safe. 

Category N (Not Structurally Damaged, Repairable) 

For vehicles that haven't suffered structural damage, the problem may be merely cosmetic or an electric issue. However, don't assume that these vehicles can be driven; non-structural issues could affect the brakes, steering, or other safety-related components. 

Can I scrap my car with outstanding finance? 

If you have outstanding finance on your car, you will need to pay off the remaining balance before you can scrap the vehicle. This is because the lender (such as a bank or financing company) still has an interest in the car. The interest will need to be paid off before the car can be sold or scrapped. 

If you scrap the car without paying off the outstanding finance, the lender may take legal action against you. This is to recover the remaining balance. It's important to check your loan agreement. Clearly understand the terms, conditions, and process for scrapping the car with outstanding finance. 

What if my car is damaged but not written off? 

If your car is damaged but not written off, you have a few options for what to do next: 

• Repair the car 
• Sell the car as is 
• Trade-in 
• Scrap the car 

If you need help with covering car repair costs, Bumper’s zero-interest credit on car repairs is a great way to spread out payments into manageable lumps. To get started, enter your reg and postcode to find out where your nearest participating Bumper car repair finance garage is.