Car finance and written-off vehicle

rorysdad

Hi


A relative bought a car on finance - HP. All payments up to date.


He had an accident recently and the third party admitted liability. They have made an offer on the car as it is a write-off. He hasn't informed the finance company of the accident - but he has been given a settlement figure by them - which is £1,300 more than the amount the third party insurers are paying for the vehicle.


In the finance agreement it states that he must inform the finance company that the car is a write-off.


**He is using a local (reputable) claims management company for his claim (which is also for whiplash injury). They have told him that he does not need to inform the finance company and that the pay out for the car is 'none of their business'.**


His dilemma is that he now has no car - but the amount the third party is paying for his write-off will buy him another vehicle.


He doesn't have the £1,300 shortfall to pay the settlement figure on the car to the finance company.


Does anyone know:


1. Does he have to inform the finance company?
2. Does he have to hand over the cheque which the insurers have sent - to the finance company
3. What does he do about the £1,300 shortfall owing to the finance company - which he does not have and cannot get hold of! If he comes clean are they likely to accept the amount of the cheque and write-off the balance!


Can he keep quiet, keep the settlement cheque and simply ensure that he carries on paying the finance as if he still had the car? The other complication is that the car is fitted with a black box which immobilises it if he misses a payment - and we think may also have a tracker in it.


If he has to hand over the settlement cheque and pay the £1,300 then he is stuck - as he has no vehicle and no money to buy another vehicle!


RD

jimjames

rorysdad wrote: »

If he has to hand over the settlement cheque and pay the £1,300 then he is stuck - as he has no vehicle and no money to buy another vehicle!


RD

If the car loan is paid off then they just take out a new loan on the new car. If this is the situation then effectively it is no different to them carrying on paying the loan on a car they no longer own as they still have a car they are paid off on credit.

It depends what the finance agreement says, initially I thought there would be no need to inform the company as long as you are continuing to pay the monthly repayments. Then you've mentioned the black box which makes a different situation.

Probably worth letting them know, the finance company may well just let you carry on paying the loan until the end date - but I guess it depends on the agreement and I'm not sure what the normal situation is here. Is the loan secured on the car or just a personal loan?

EDIT - just re-read. If the settlement figure is £1300 then you have a case for trying to get the valuation increased to nearer that? With the whiplash claim would that cover the entire balance?

rorysdad

Thanks Jim.


The real questions are:


1. If he keeps quiet will the HP company find out the car has been written off? If they do, is he in trouble with the law (criminally I mean)? This assumes that he continues to pay the instalments until the end of the agreement and does not miss a payment
2. Why would a claims management company advise him that the payout on the car (£2,100) was 'nothing to do with the finance company' - the finance company being the legal owner of the car - a car that effectively now no longer exists and which was their security against the money they loaned for the car to be purchased?
3. If he tells the HP company the truth can he be made to hand them the cheque for the write off value?
4. As he does not have the £1,300 balance due to settle the finance, what is the HP likely to do about that? Sue him? Accept instalments? Or something else?


There is no question that he is going to take out finance for another car with the HP company. He was 'ripped off' (bad credit record and desperate for a vehicle and with no money to put up any deposit, but car needed to keep his job etc) with the current car - paying £7K over 3 years for a car worth £2K!


The whiplash claim looks like it will be worth around £2k - but he does not know when that will be paid out as he doesn't go for a medical until mid April.


I also read somewhere that DVLA and/or the TP insurer will inform the HP company, as owner that the car has been written off? So, that will let the cat out of the bag!


Also, I read that the TP insurer will have/should have checked on ownership of the car before negotiating a value for the car - but it seems that they likely have NOT done this as they are paying the cheque direct to my relative!!?


He can also get £150 from a scrapyard for the car - so, again might they inform the HP people.


The situation he really wants is:


1. Keep the £2,100 cheque to buy a new car (not on finance!), and
2. Continue paying the HP agreement monthly until it ends.


Legally, whose money is the £2,100 - his or the HP company's?


What do people think?


RD

InsideInsurance

rorysdad wrote: »

Does anyone know:

1. Does he have to inform the finance company?
2. Does he have to hand over the cheque which the insurers have sent - to the finance company
3. What does he do about the £1,300 shortfall owing to the finance company - which he does not have and cannot get hold of! If he comes clean are they likely to accept the amount of the cheque and write-off the balance!

1 & 2. If the insurer does their job properly they will do a HPI check and will therefore identify the other interested party in the vehicle and send the settlement cheque to the HP company

3. They have to pay it, do they have GAP insurance in place?

flashg67

I'd be inclined to ignore the well meaning advice and check the finance docs carefully. It is the finance companies business - AFAIK, the finance co are the legal owners of the car until the final payment is made on the HP agreement eg the 'purchase' part of 'Hire Purchase'

Nodding_Donkey

As said in post #4, the insurance company will pay the money straight to the HP company as it is their car.

NewUserHere

The HP company own the vehicle - not telling them that their vehicle has been scrapped isn't right, i'd be questioning how "reputable" this claims management company actually is!!

I take it he never took out gap insurance?

motorguy

rorysdad wrote: »

Hi


A relative bought a car on finance - HP. All payments up to date.


He had an accident recently and the third party admitted liability. They have made an offer on the car as it is a write-off. He hasn't informed the finance company of the accident - but he has been given a settlement figure by them - which is £1,300 more than the amount the third party insurers are paying for the vehicle.


In the finance agreement it states that he must inform the finance company that the car is a write-off.


**He is using a local (reputable) claims management company for his claim (which is also for whiplash injury). They have told him that he does not need to inform the finance company and that the pay out for the car is 'none of their business'.**


His dilemma is that he now has no car - but the amount the third party is paying for his write-off will buy him another vehicle.


He doesn't have the £1,300 shortfall to pay the settlement figure on the car to the finance company.


Does anyone know:


1. Does he have to inform the finance company?
2. Does he have to hand over the cheque which the insurers have sent - to the finance company
3. What does he do about the £1,300 shortfall owing to the finance company - which he does not have and cannot get hold of! If he comes clean are they likely to accept the amount of the cheque and write-off the balance!


Can he keep quiet, keep the settlement cheque and simply ensure that he carries on paying the finance as if he still had the car? The other complication is that the car is fitted with a black box which immobilises it if he misses a payment - and we think may also have a tracker in it.


If he has to hand over the settlement cheque and pay the £1,300 then he is stuck - as he has no vehicle and no money to buy another vehicle!


RD

The insurance company will pay the finance company direct, and the finance company will chase your friend for the difference.

The car - or the remains of it - will become the property of the insurance company. they will dispose of it, most likely for it to be put back on the road by another party.

Your friend has no choice here - he will NOT be allowed to keep making payments on a car they no longer own.

They need to find £1300 PDQ - and given they're in line for a whiplash claim they may well want to set moneys aside from it to do it - and perhaps borrow from friend / family against that.

If your relative has a black box in the car that immobilises it if they dont make a payment it suggests they perhaps havent got the best credit rating in the world - the last thing they would therefore need is to be involved in any sort of activity that could be perceived as fraud.

motorguy

NewUserHere wrote: »

The HP company own the vehicle - not telling them that their vehicle has been scrapped isn't right, i'd be questioning how "reputable" this claims management company actually is!!

I take it he never took out gap insurance?

I would say the claims management company are saying the person doesnt have to tell the insurance company of the whiplash claim / any other claim they can make for loss of earnings, etc.

InsideInsurance

Nodding_Donkey wrote: »

As said in post #4, the insurance company will pay the money straight to the HP company as it is their car.

In some insurance companies third party claims are handled in a slightly more lax method than first party claims. This can mean skipping the HPI checks etc or actually not total lossing the vehicle but simply giving cash in lieu of repairs up to the vehicles value and leaving the salvage with the TP.

In a CiL case the money would go to the OP and technically it would be up to them what they do though I strongly suspect the contract with the finance company would require them to inform them of the situation and disposing of the wreck would be a problem with any reputable yard.

colino

The dodgy claims company will say anything to you to get their cut and move on.
I've never seen a car finance agreement that doesn't include clauses that the car should not only be kept in good order, but should also be properly insured at all times. In fact some sub-primers wouldn't clear a deal without a copy of the comprehensive policy doc.: The reason being, as they have an interest in the car, in the event of a total loss they do not lose out. The nice insurance company sends a cheque to them and if there is a balance, the hirer makes up the difference.
I'm not really sure why people engage with third party claims companies (other than falling for their sales patter), if you are an innocent party and paying for insurance, let them deal with it. The circumstances that the OP paints are that an innocent party will have had a collision, lost the car, be out of pocket and in breach of their finance agreement. Hardly a return to their status before a no-fault incident.