A car is considered totaled when the cost of repairing it plus its salvage value adds up to more than the vehicle was worth immediately before the damage occurred. A car may also be considered totaled if the cost of repairs exceeds a certain percentage of the vehicle's value, as dictated by state law.
For instance, New York uses a total loss threshold (TLT) of 75%, meaning that a car must be totaled if its repair costs are 75% or more of its actual cash value. Total loss thresholds like the one used in New York leave a cushion for higher-than-estimated repair costs, given that damage is often more extensive than it initially appears. If the state doesn’t have a total loss threshold law, insurers will generally use the standard totaled car formula, which includes the salvage value.
How to Determine If a Car Is Totaled
Most States: A car is totaled if the cost of repairs plus the salvage value is greater than the actual cash value.
Total Loss Threshold States: A car is totaled if the cost of repairs is greater than a certain percentage of the vehicle’s actual cash value. Total loss thresholds are often 70%-80%, depending on the state.
Many states also allow the owner of the vehicle to declare the car a total loss at will. However, that is only for title purposes – you cannot call your vehicle a total loss for the sake of an insurance payout.
Factors That Affect Whether a Car Is Totaled
Insurance companies take a car’s repair costs, salvage value and actual cash value into account when deciding if it should be totaled, along with applicable state law.
Repair Costs: A vehicle’s repair costs vary depending on extent of the damage as well as the car’s make, model, and year. For instance, luxury cars and cars with specialty parts, like hybrids, are usually the most expensive to repair.
Salvage Value: A car’s salvage value is the amount that the vehicle is worth in its damaged state, such as for parts and scrap metal.
Actual Cash Value: A car’s actual cash value (ACV) is the amount the car would be worth if it hadn’t sustained the damage in question. Insurers determine ACV by comparing the car to similar vehicles in the area, accounting for factors such as mileage, condition, and extra parts. ACV is also important to drivers because insurers will pay them the car’s ACV if the vehicle is totaled in a covered scenario.
Finally, you can always ask your insurer if you don’t understand how they decided your car was totaled. And if you have evidence to support your claim, you can also argue that your car was worth more than the insurer estimated. For more information, check out WalletHub’s guide to totaled cars.
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