What defines if car is a write off?
Can anyone tell me what is the legal position about when an insurance company can insist on writing a car off or not? Our 8 year old car was recently hit from behind while we were stationary. The other driver admitted he was at fault and his insurance company have agreed to pay for damage. The insurance company are insisting that cost of repair is much more than value of car and so want to pay us a lump sum to write it off. On inspection they were not comparing like with like as the garage estimate includes VAT which they would obviously be able to reclaim while if they pay us a lump sum they would not reclaim any VAT. So in reality if VAT ignored the repair estimate and car value are about equal – I think car value very slightly more than repair cost but not much in it.
It seems irresponsible to send a car to landfill unnecessarily especially if repair is very slightly cheaper than car value. Are there any industry rules about ratio of repair amount against value before it is scrapped? I would like the insurance company to repair car as it is in excellent condition and likely to last me at least another 5 or 6 years and I don’t want the inconvenience of having to test drive cars to find a replacement.
The car is still safe to drive and I understand I have the option to retain the car although they would then reduce the scrappage value by £600. I suspect I could get an independent garage to repair using 2nd hand parts but I am worried that if car is officially labelled as having been a write-off it will be more difficult / expensive to insure in the future and will also be more difficult to eventually sell.
I did ask the insurance company to provide a copy of the full garage report as I wanted to know exactly why the price quoted was much higher than I would expect. But they are refusing to do so claiming confidentially reasons – apparently the garage give them a special discount which is confidential. They are only telling me the total price quoted by the garage and have listed parts they would replace but there is no itemised price list or breakdown of what is involved. Can insurance company with hold full garage report?
Unfortunately my own insurance is with the same company as the at fault driver so I cannot get my insurance to organise repair and then bill the at fault company.
It seems irresponsible to send a car to landfill unnecessarily especially if repair is very slightly cheaper than car value. Are there any industry rules about ratio of repair amount against value before it is scrapped? I would like the insurance company to repair car as it is in excellent condition and likely to last me at least another 5 or 6 years and I don’t want the inconvenience of having to test drive cars to find a replacement.
The car is still safe to drive and I understand I have the option to retain the car although they would then reduce the scrappage value by £600. I suspect I could get an independent garage to repair using 2nd hand parts but I am worried that if car is officially labelled as having been a write-off it will be more difficult / expensive to insure in the future and will also be more difficult to eventually sell.
I did ask the insurance company to provide a copy of the full garage report as I wanted to know exactly why the price quoted was much higher than I would expect. But they are refusing to do so claiming confidentially reasons – apparently the garage give them a special discount which is confidential. They are only telling me the total price quoted by the garage and have listed parts they would replace but there is no itemised price list or breakdown of what is involved. Can insurance company with hold full garage report?
Unfortunately my own insurance is with the same company as the at fault driver so I cannot get my insurance to organise repair and then bill the at fault company.
0
Comments
-
Why would they be able to reclaim VAT? Any insurance payout for repairs includes the total cost including any VAT.Can anyone tell me what is the legal position about when an insurance company can insist on writing a car off or not? Our 8 year old car was recently hit from behind while we were stationary. The other driver admitted he was at fault and his insurance company have agreed to pay for damage. The insurance company are insisting that cost of repair is much more than value of car and so want to pay us a lump sum to write it off. On inspection they were not comparing like with like as the garage estimate includes VAT which they would obviously be able to reclaim while if they pay us a lump sum they would not reclaim any VAT. So in reality if VAT ignored the repair estimate and car value are about equal – I think car value very slightly more than repair cost but not much in it.
It seems irresponsible to send a car to landfill unnecessarily especially if repair is very slightly cheaper than car value. Are there any industry rules about ratio of repair amount against value before it is scrapped? I would like the insurance company to repair car as it is in excellent condition and likely to last me at least another 5 or 6 years and I don’t want the inconvenience of having to test drive cars to find a replacement.
The car is still safe to drive and I understand I have the option to retain the car although they would then reduce the scrappage value by £600. I suspect I could get an independent garage to repair using 2nd hand parts but I am worried that if car is officially labelled as having been a write-off it will be more difficult / expensive to insure in the future and will also be more difficult to eventually sell.
I did ask the insurance company to provide a copy of the full garage report as I wanted to know exactly why the price quoted was much higher than I would expect. But they are refusing to do so claiming confidentially reasons – apparently the garage give them a special discount which is confidential. They are only telling me the total price quoted by the garage and have listed parts they would replace but there is no itemised price list or breakdown of what is involved. Can insurance company with hold full garage report?
Unfortunately my own insurance is with the same company as the at fault driver so I cannot get my insurance to organise repair and then bill the at fault company.
If you want the car then you have the option of buying it back from the insurer.0 -
Its not just the cost of the repair, they factor in other things like the cost of a hire car while they carry out the repair.
If the repair costs £2k but hiring a courtesy car for 3 weeks also costs another £2k thats now £4k in bills, its cheaper for the to write the car off as its uneconomical to repair.0 -
IIRC cars are usually written off where repair cost is more than some percentage of value. The percentage varies a bit from one underwriter to the next but it's usually about 70%ish, I think.
From the insurer's POV, if repair and write-off are about the same cost, they're obviously going to write it off. You might be unhappy with the repair and it could drag on, whereas with a write-off they can settle it with one payment. The detail they consider that you've not taken fully into account is that if they do write a car off, they can flog it, and possibly for a lot more than scrap.
The same thing happened to me a few years ago. The car was rear-ended, wrecking the rear bumper and bending the bodyshell behind it so the hatch wouldn't shut. It was repairable in the sense that if you hammered the dent out and fitted a new bumper, it would all look and feel fine. But that's not a proper back-to-previous-condition repair that an insurer will do. So they wrote it off, gave me far more for it than I was expecting, and a few months later I had a letter through the post from its new owner wanting to know what had happened.
Obviously someone had bought it and done that repair. The point being that write-off minus selling the car cost the insurer a lot less than repairing it would cost.0 -
OP, £600 scrap value sounds high. The last time I had a car written off, it was a fiesta worth about £750. The damage caused by another driver would have cost about £1k to repair, so I took a pay-out and kept the car - the car basically cost me about £20, as I got £730 cheque and kept the car. As it was safe to drive, I drove it for a couple of weeks before replacing as it looked a mess.
If you are happy to have the car as is, ask them for the money and use the car, repair from the pay-out, and bank the profit. Yes it will be less valuable when you come to sell, but even if it is £600 off the pay-out based on the full value, the car has actually only cost you £600 to 'purchase', not the value as was, if that makes sense. If the car was worth £3k, they let you keep the car and give you £2.4k, you spend £1k fixing it to as it was, and the rest is to offset the loss of value when/if you sell it. You have a car that may be now worth £2k, and £1.4k in the bank - maybe.0 -
As others state you can always buy the car back from the insureres then carry out the remedial yourself0
-
Why would they be able to reclaim VAT? Any insurance payout for repairs includes the total cost including any VAT.
If you want the car then you have the option of buying it back from the insurer.
Things may have changed, but when I worked for an insurance company our premiums were exempt from VAT. As a consequence, we could not reclaim VAT on our outgoings.0 -
VAT is charged to the end user and probably the insurer is the end-user of the repairs so I would not be surprised to learn that the VAT were not recoverable. ISTR this is why you can't claim the VAT on entertaining.0
-
Things may have changed, but when I worked for an insurance company our premiums were exempt from VAT. As a consequence, we could not reclaim VAT on our outgoings.
You pay insurance premium tax, which keeps going up (and cannot be claimed back if you are a business), but no VAT.
I wonder why? ~Insurance is a service, so it should be VATable for consumers.
I suppose if Hammond (not Richard -the other one) reads this we can expect another 20% rise after the October budget
I want to go back to The Olden Days, when every single thing that I can think of was better.....
(except air quality and Medical Science
)0 -
I am fairly sure that it is mandatory for companies to register for VAT if their turnover is more than £85,000 so ANY insurance company will be registered for VAT and would indeed be able to reclaim the VAT on repairs. The fact that IPT instead of VAT is added onto premiums is irrelevant. Most insurance companies will likely also be involved in other financial activities that probably do incur VAT but I don't think this is relevant.0
-
You can only "recover" VAT if a, you are VAT registered and b, your supplies are not VAT exempt. Insurance is VAT exempt. As stated Insurance companies will not be able to reclaim the VAT from a payout for a repair.westernpromise wrote: »VAT is charged to the end user and probably the insurer is the end-user of the repairs so I would not be surprised to learn that the VAT were not recoverable. ISTR this is why you can't claim the VAT on entertaining.0
This discussion has been closed.
Categories
- All Categories
- 343.1K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.2K Work, Benefits & Business
- 607.9K Mortgages, Homes & Bills
- 173K Life & Family
- 247.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards