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Car finance ›
What happens if you crash a financed car?
Updated: Monday, 15 January 2024
Buying a car may be one of the biggest purchases you’ll make. The last thing you want is to be involved in an accident, but if the worst does happen, it may help to know how your finance agreement is affected and what you should do.
In this guide, we’ll explain what a car accident could mean for your car finance agreement and what to do if your car is written off.
In this guide
- What happens if you damage or crash your financed car?
- What should you do if you crash a financed car?
- What is an insurance write-off?
- What happens if you write-off a financed car?
- What should you do if you write-off a car on finance?
- What is classed as wear and tear on a financed car?
- Who pays for repairs on a financed car?
- FAQs about damages to a financed car
What happens if you damage or crash your financed car?
If you crash or damage a car on finance, what happens next will depend on how severe the damage is and the type of car finance agreement you have.
With most types of finance, you are the registered keeper, which means you are responsible for insuring and looking after the car. In most cases, you would need to pay for any repairs the car needs. These may be covered by your car insurance policy, depending on the exact circumstances of your accident.
What should you do if you crash a financed car?
Buying a car may be one of the biggest purchases you’ll make. The last thing you want is to be involved in an accident, but if the worst does happen, it may help to know how your finance agreement is affected and what you should do.
In this guide, we’ll explain what a car accident could mean for your car finance agreement and what to do if your car is written off.
In this guide
- What happens if you damage or crash your financed car?
- What should you do if you crash a financed car?
- What is an insurance write-off?
- What happens if you write-off a financed car?
- What should you do if you write-off a car on finance?
- What is classed as wear and tear on a financed car?
- Who pays for repairs on a financed car?
- FAQs about damages to a financed car
What happens if you damage or crash your financed car?
If you crash or damage a car on finance, what happens next will depend on how severe the damage is and the type of car finance agreement you have.
With most types of finance, you are the registered keeper, which means you are responsible for insuring and looking after the car. In most cases, you would need to pay for any repairs the car needs. These may be covered by your car insurance policy, depending on the exact circumstances of your accident.
What should you do if you crash a financed car?
Contact your lender
It’s best to contact your finance company as soon as you can to explain what has happened and explore your options.
If you’re a Moneybarn customer, contact us and our friendly team can discuss your options and provide support.
Contact your insurer
You should report any accident to your car insurance company, even if you aren’t planning to make a claim. Depending on your policy, you may be able to claim the cost of repairs, but it’s best to contact your insurer to discuss this.
Continue making payments
You should keep making monthly payments, even while the car is being repaired or if it has been written-off. If you stop paying your car finance, it could affect your credit score and your eligibility for credit in the future.
Contact your lender
It’s best to contact your finance company as soon as you can to explain what has happened and explore your options.
If you’re a Moneybarn customer, contact us and our friendly team can discuss your options and provide support.
Contact your insurer
You should report any accident to your car insurance company, even if you aren’t planning to make a claim. Depending on your policy, you may be able to claim the cost of repairs, but it’s best to contact your insurer to discuss this.
Continue making payments
You should keep making monthly payments, even while the car is being repaired or if it has been written-off. If you stop paying your car finance, it could affect your credit score and your eligibility for credit in the future.
What is an insurance write-off?
An insurance write-off means that the vehicle can’t be repaired or the repair costs exceed the car’s value. Below are the different categories of car insurance write-offs:
You might have heard of Category C and Category D write-offs. These are old classifications that were used up until October 2017, when the insurance write-off categories were changed.
Category D was used for cars that could be repaired, but the total costs would be higher than the car’s value. In the new system, this has been replaced by Category N. These cars can return to the road as long as they are repaired to a roadworthy condition.
Category C was used for cars that could be repaired, but the repair costs would be higher than the car is worth. Category C cars are now known as Category S.
What happens if you write-off a financed car?
Writing off a financed car is a situation no-one wants to be in. When a car has been written off by your insurance provider, they will offer a settlement price. The settlement price is usually the car’s value before it was involved in an accident.
For example: let’s say your car was worth £5,000 and was in an accident, and it costs £8,000 to repair it. In this case, the car would be written off because it is uneconomical to repair it. Depending on the circumstances, your insurance may pay out what the car was worth before the accident (£5,000).
It is important to remember that your car finance agreement will still be in place. This means that you must continue to make your monthly repayments. This is because the car is still the property of the finance company until the finance amount has been settled.
What should you do if you write-off a car on finance?
If you’ve been involved in a crash in a financed car, and your vehicle is a write-off, it is important to contact both your insurance provider and your lender as soon as possible. Your lender will be able to tell you about their exact policy when one of their cars is written off.
The most common course of action will be to obtain a settlement figure from your insurance company, which will then go towards paying off any outstanding finance.
You will need to contact your lender to inform them of an insurance claim. Your lender will advise what options are available, this may include using an insurance payout to settle the finance agreement early, or some lenders may allow the agreement to continue.
Finance and insurance companies work independently from each other. The figure you receive from an insurance write-off could leave a shortfall and you would be expected to pay the difference. If this is the case then it’s best to speak to your finance company, as they can discuss the options available to you.
What is classed as wear and tear on a financed car?
If you have a type of finance where you can give the car back to the finance company, or if you have a PCH (leasing) agreement, you must return the car in good condition.
Each lender will have a different idea of what they consider wear and tear, so you should confirm this when you take out the agreement. If you’re unsure, check your contract and it will outline what this means.
Every lender is different, so we can’t speak for everyone. Wear and tear should not be confused with damage as a result of a specific event or accident, such as an accident or crash.
Some common examples of wear and tear include light scratches, light chips or scuffs on the bodywork, interior seats, and trim. These are things that happen naturally over time, not things that happen because the car has been in an accident.
Who pays for repairs on a financed car?
With most popular types of car finance (CS, HP, and PCP), you will be responsible for the cost of any repairs needed. This is because you will usually be the registered keeper of the car, meaning you are responsible for keeping it in good condition.
Because of this, it’s important to find a suitable car insurance policy. If you are involved in an accident that wasn’t your fault, your insurance company will typically cover the repair cost.
If the car is written off, depending on the circumstances the insurance company may pay the value of the car before it was involved in an accident. This insurance payout may be enough to cover the remaining car finance balance.
We can’t speak for everyone’s circumstances. Insurance claims are unique and depend on the exact details of your situation. That’s why it’s best to contact your finance company and insurance provider, and they can explain who is responsible for paying for repairs.
FAQs about damages to a financed car
What happens if I am involved in a car accident that is not my fault?
If you are involved in a car accident that is not your fault, the insurance claim will typically be made through the other party’s insurance.
You will still need to notify your insurance company and provide them with details of how the accident occurred. You should also pass over the other driver’s insurance information and details.
As with any accident with a financed car, you should notify your lender as soon as you can.
Will my insurance pay off my car finance if I crash?
If your financed car has been written off, any pay out from your car insurance provider can be used to pay off the outstanding car finance balance.
If you still have a remaining balance on your car finance agreement after your insurer’s contribution, you will be responsible for paying this. Contact your lender and they will be able to give you a settlement figure and discuss your options.
What is an insurance write-off?
An insurance write-off means that the vehicle can’t be repaired or the repair costs exceed the car’s value. Below are the different categories of car insurance write-offs:
You might have heard of Category C and Category D write-offs. These are old classifications that were used up until October 2017, when the insurance write-off categories were changed.
Category D was used for cars that could be repaired, but the total costs would be higher than the car’s value. In the new system, this has been replaced by Category N. These cars can return to the road as long as they are repaired to a roadworthy condition.
Category C was used for cars that could be repaired, but the repair costs would be higher than the car is worth. Category C cars are now known as Category S.
What happens if you write-off a financed car?
Writing off a financed car is a situation no-one wants to be in. When a car has been written off by your insurance provider, they will offer a settlement price. The settlement price is usually the car’s value before it was involved in an accident.
For example: let’s say your car was worth £5,000 and was in an accident, and it costs £8,000 to repair it. In this case, the car would be written off because it is uneconomical to repair it. Depending on the circumstances, your insurance may pay out what the car was worth before the accident (£5,000).
It is important to remember that your car finance agreement will still be in place. This means that you must continue to make your monthly repayments. This is because the car is still the property of the finance company until the finance amount has been settled.
What should you do if you write-off a car on finance?
If you’ve been involved in a crash in a financed car, and your vehicle is a write-off, it is important to contact both your insurance provider and your lender as soon as possible. Your lender will be able to tell you about their exact policy when one of their cars is written off.
The most common course of action will be to obtain a settlement figure from your insurance company, which will then go towards paying off any outstanding finance.
You will need to contact your lender to inform them of an insurance claim. Your lender will advise what options are available, this may include using an insurance payout to settle the finance agreement early, or some lenders may allow the agreement to continue.
Finance and insurance companies work independently from each other. The figure you receive from an insurance write-off could leave a shortfall and you would be expected to pay the difference. If this is the case then it’s best to speak to your finance company, as they can discuss the options available to you.
What is classed as wear and tear on a financed car?
If you have a type of finance where you can give the car back to the finance company, or if you have a PCH (leasing) agreement, you must return the car in good condition.
Each lender will have a different idea of what they consider wear and tear, so you should confirm this when you take out the agreement. If you’re unsure, check your contract and it will outline what this means.
Every lender is different, so we can’t speak for everyone. Wear and tear should not be confused with damage as a result of a specific event or accident, such as an accident or crash.
Some common examples of wear and tear include light scratches, light chips or scuffs on the bodywork, interior seats, and trim. These are things that happen naturally over time, not things that happen because the car has been in an accident.
Who pays for repairs on a financed car?
With most popular types of car finance (CS, HP, and PCP), you will be responsible for the cost of any repairs needed. This is because you will usually be the registered keeper of the car, meaning you are responsible for keeping it in good condition.
Because of this, it’s important to find a suitable car insurance policy. If you are involved in an accident that wasn’t your fault, your insurance company will typically cover the repair cost.
If the car is written off, depending on the circumstances the insurance company may pay the value of the car before it was involved in an accident. This insurance payout may be enough to cover the remaining car finance balance.
We can’t speak for everyone’s circumstances. Insurance claims are unique and depend on the exact details of your situation. That’s why it’s best to contact your finance company and insurance provider, and they can explain who is responsible for paying for repairs.
FAQs about damages to a financed car
What happens if I am involved in a car accident that is not my fault?
If you are involved in a car accident that is not your fault, the insurance claim will typically be made through the other party’s insurance.
You will still need to notify your insurance company and provide them with details of how the accident occurred. You should also pass over the other driver’s insurance information and details.
As with any accident with a financed car, you should notify your lender as soon as you can.
Will my insurance pay off my car finance if I crash?
If your financed car has been written off, any pay out from your car insurance provider can be used to pay off the outstanding car finance balance.
If you still have a remaining balance on your car finance agreement after your insurer’s contribution, you will be responsible for paying this. Contact your lender and they will be able to give you a settlement figure and discuss your options.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
