Car Finance and insurance write off

purpleniki

My husband bought his car two months ago via a fixed term loan finance agreement but has unfortunately written the car off. What happens to the fixed term loan now and do we have to inform the finance company that the car has been written off? Does the insurance company pay us or the finance company directly? Any advice would be appreciated. Thanks.

molerat

If it is a fixed term loan not secured on the vehicle then you can do as you please with the settlement amount.  If though it is secured on the vehicle then you need to inform them and the insurers will pay direct to the finance co. They will in turn come to you for any remaining amount which will likely be immediately due. READ THE AGREEMENT as it will all be detailed there.

Mercdriver

Was the loan secured on the car?  If so, they should be paid directly by the insurance company.  If not, you will get the payment directly, but will obviously be still liable to the finance company for the full balance

AdrianC

Yes, you need to tell the financier - their loan is secured on the now-non-existent car.
Depending on what type of finance, you will probably get the money paid to you.

And, no, it probably won't be enough to pay off the finance. And, no, that's not the insurer's problem - unless you have gap insurance.

purpleniki

I have looked through the loan agreement and it does not specifically say the loan is secured against the car but it does say the loan is for the purposes of purchasing the vehicle (the goods listed in the credit information)? Is this basically the same thing then?

AdrianC

Not necessarily, but probably.

KimJongUn88

Most insurers HPI the car when it’s written off and contact the finance company prior to effecting any payment.

Who arranges the finance for you? Did you go to your bank or was it at the dealership?

purpleniki

KimJongUn88 said:

Most insurers HPI the car when it’s written off and contact the finance company prior to effecting any payment.

Who arranges the finance for you? Did you go to your bank or was it at the dealership?

It was the dealership (Perry's) that arranged the finance

DrEskimo

purpleniki said:

KimJongUn88 said:

Most insurers HPI the car when it’s written off and contact the finance company prior to effecting any payment.

Who arranges the finance for you? Did you go to your bank or was it at the dealership?

It was the dealership (Perry's) that arranged the finance

Then yes, the finance is secured on the car and needs to be settled in full. 

Did you take out any GAP insurance?

Do you know how much the insurance are going to pay for the write off? I would contact the finance company to tell them and to also get a settlement figure for the finance so you know how much needs to be cleared to settle the finance in full. 

Its depends on the exact nature of your finance arrangement, but it's quite possible that you will owe more than the insurance company are going to pay out, so unless you have GAP insurance you will need to fund the difference from savings to settle the finance in full. 

Scrapit

For the price of it I can't understand why people dont take out gap insurance, usually a couple hundred quid maximum. 

DrEskimo

Scrapit said:

For the price of it I can't understand why people dont take out gap insurance, usually a couple hundred quid maximum. 

I tend to agree. Mine was £250 for 5yrs cover, so only an extra £50 per year on top of my typical £300 annual insurance policy. 

The counter argument is that anyone's risk of having a car written off is extremely low. I agree, but given it's such a small cost and could be worth a substantial amount (also in time by not having to argue with insurance companies about a sensible write off amount), I've made the decision that it worth it...I am probably more risk averse generally though.