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  • FIRST POST
    • AZM
    • By AZM 10th Aug 18, 9:13 AM
    • 2Posts
    • 0Thanks
    AZM
    What defines if car is a write off?
    • #1
    • 10th Aug 18, 9:13 AM
    What defines if car is a write off? 10th Aug 18 at 9:13 AM
    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.
Page 1
    • neilmcl
    • By neilmcl 10th Aug 18, 9:17 AM
    • 12,229 Posts
    • 8,994 Thanks
    neilmcl
    • #2
    • 10th Aug 18, 9:17 AM
    • #2
    • 10th Aug 18, 9:17 AM
    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.
    Originally posted by AZM
    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.
    • snnl
    • By snnl 10th Aug 18, 9:35 AM
    • 54 Posts
    • 37 Thanks
    snnl
    • #3
    • 10th Aug 18, 9:35 AM
    • #3
    • 10th Aug 18, 9:35 AM
    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.
    • westernpromise
    • By westernpromise 10th Aug 18, 9:43 AM
    • 4,263 Posts
    • 5,553 Thanks
    westernpromise
    • #4
    • 10th Aug 18, 9:43 AM
    • #4
    • 10th Aug 18, 9:43 AM
    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.
    Buying a house, if you believe the market has a way to fall, or if you are paying sill asking prices ( like some sheeple ) or if you are buying in London, is now a massive financial gamble!!!!! - June 8, 2012 by TheCountOfNowhere
    • Bigphil1474
    • By Bigphil1474 10th Aug 18, 9:48 AM
    • 933 Posts
    • 426 Thanks
    Bigphil1474
    • #5
    • 10th Aug 18, 9:48 AM
    • #5
    • 10th Aug 18, 9:48 AM
    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.
    • bengalknights
    • By bengalknights 10th Aug 18, 9:49 AM
    • 4,486 Posts
    • 1,640 Thanks
    bengalknights
    • #6
    • 10th Aug 18, 9:49 AM
    • #6
    • 10th Aug 18, 9:49 AM
    As others state you can always buy the car back from the insureres then carry out the remedial yourself
    • Car 54
    • By Car 54 10th Aug 18, 10:10 AM
    • 3,649 Posts
    • 2,265 Thanks
    Car 54
    • #7
    • 10th Aug 18, 10:10 AM
    • #7
    • 10th Aug 18, 10:10 AM
    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.
    Originally posted by neilmcl

    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.
    • westernpromise
    • By westernpromise 10th Aug 18, 10:34 AM
    • 4,263 Posts
    • 5,553 Thanks
    westernpromise
    • #8
    • 10th Aug 18, 10:34 AM
    • #8
    • 10th Aug 18, 10:34 AM
    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.
    Buying a house, if you believe the market has a way to fall, or if you are paying sill asking prices ( like some sheeple ) or if you are buying in London, is now a massive financial gamble!!!!! - June 8, 2012 by TheCountOfNowhere
    • facade
    • By facade 10th Aug 18, 10:57 AM
    • 3,618 Posts
    • 1,897 Thanks
    facade
    • #9
    • 10th Aug 18, 10:57 AM
    • #9
    • 10th Aug 18, 10:57 AM
    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.
    Originally posted by Car 54

    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 )
    • AZM
    • By AZM 10th Aug 18, 11:38 AM
    • 2 Posts
    • 0 Thanks
    AZM
    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.
    • neilmcl
    • By neilmcl 10th Aug 18, 11:40 AM
    • 12,229 Posts
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    neilmcl
    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.
    Originally posted by westernpromise
    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.
    • neilmcl
    • By neilmcl 10th Aug 18, 11:41 AM
    • 12,229 Posts
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    neilmcl
    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.
    Originally posted by AZM
    You are wrong. See my post above.
    • MovingForwards
    • By MovingForwards 10th Aug 18, 11:57 AM
    • 422 Posts
    • 511 Thanks
    MovingForwards
    Depends on the insurance company but if the cost of repairs is 60-70% of the value of the vehicle it is written off.

    The repair estimate will include every single nut, bolt, washer, part, paint and labour. Everything will be new, they do not put used parts on.

    As others have said you may have the option of having your car back from the insurance company, what they will do is deduct the excess (recoverable from the TP ins co) and scrap value return from the write off value and give you the difference.

    You can repair it with used parts from the scrappy, repaint it yourself/your mate/a garage (that is the expensive part), re MOT it (it will be a requirement of your insurance company for a new MOT due to it being deemed a total loss) and then you are back on the road.

    If your car is involved in another collision, fault or non fault, your car will be valued lower as it was previously written off.
    • motorguy
    • By motorguy 10th Aug 18, 12:48 PM
    • 18,024 Posts
    • 11,032 Thanks
    motorguy
    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 !!!8211; 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!!!8217;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 !!!8211; 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.
    Originally posted by AZM
    Your not factoring in :-
    • Salvage value
    • Incidental costs - hire car, etc.

    The car wont go to "landfill" - it'll be resold to a salvage yard, bought and put back on the road.

    Its not up to you to scrutinise the repair bill to see if its line with "what you expect" - the car has to be put back on the road to a specific standard which their approved repairers will meet. Not up to you to question or have input in to that.

    They're offering you the opportunity to buy it, so why not just buy it and have the repairs done?
    "We have normality. I repeat, we have normality. Anything you still can't cope with is therefore your own problem."
    • Tarambor
    • By Tarambor 10th Aug 18, 3:45 PM
    • 3,978 Posts
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    Tarambor
    You are wrong. See my post above.
    Originally posted by neilmcl
    In saw your post and you clearly know nothing about how VAT works. Any company with a turnover of over £85000 has to register for VAT. If they get an invoice with VAT on it they can reclaim it even if they are the end customer. If for example I have a VAT registered business and I pay out more VAT than I charge then HMRC refund me the difference between the VAT paid over VAT charged. A VAT registered business might at the point of settling pay VAT on an invoice but in reality they don't actually pay any VAT at all because it is recouped at the end of the current VAT period.
    • redux
    • By redux 10th Aug 18, 3:55 PM
    • 18,713 Posts
    • 25,038 Thanks
    redux
    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.
    Originally posted by AZM
    Some insurers do not want to insure a car after write-off and repair, but for others it isn't a problem.

    I had my insurer telling me this, but in the end we arranged they paid me in lieu of the repairs (which were only cosmetic) and did not write it off.
    • neilmcl
    • By neilmcl 10th Aug 18, 4:04 PM
    • 12,229 Posts
    • 8,994 Thanks
    neilmcl
    In saw your post and you clearly know nothing about how VAT works. Any company with a turnover of over £85000 has to register for VAT. If they get an invoice with VAT on it they can reclaim it even if they are the end customer. If for example I have a VAT registered business and I pay out more VAT than I charge then HMRC refund me the difference between the VAT paid over VAT charged. A VAT registered business might at the point of settling pay VAT on an invoice but in reality they don't actually pay any VAT at all because it is recouped at the end of the current VAT period.
    Originally posted by Tarambor
    Having been VAT registered for the past 25 odd years I'd say I do know how VAT works. There are specific rules for Insurance companies and VAT, something you clearly have no knowledge off!

    And it's not just a turnover of over £85,000 pa, it's VAT Taxable turnover, which can be two different things.
    Last edited by neilmcl; 10-08-2018 at 4:07 PM.
    • Norman Castle
    • By Norman Castle 10th Aug 18, 4:59 PM
    • 7,700 Posts
    • 6,459 Thanks
    Norman Castle
    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.
    Visit a few bodyshops to get repair quotes, explain you will be paying and not an insurer. Ask the insurers what category it will be when written off, this will affect insurance quotes and resale value.


    What car is it and what was the pre accident value?
    Don't harass a hippie. You'll get bad karma.

    Never trust a newbie with a rtb tale.
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