If you’ve been involved in an accident or some other event that has resulted in your car being written off, you may be wondering where to go from here. And what happens if you’ve taken out finance to help pay for your car? How will a write off affect your finance plan and what are the next steps?
Thankfully, there are several options for your damaged car that could even see you making some money. Read on to find out more about write offs and how you can turn one into a positive, even when you’ve got car finance.
What is a write off?
A write off is the term most commonly used when a car has received enough damage in an accident to make repairing it more expensive than the value of the car. This can include any kind of damage, internal or external, and even minor damage, since it only has to be more expensive than the car itself in order for it to be written off.
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The categories for write offs
When a vehicle is written off, it falls under one of four categories. These categories can affect what happens to a car once it’s been written off, so it’s important to understand what they mean. The categories below are slightly different to what you might be familiar with due to the fact that the categorisation changed in October 2017.
Category A is the first of the categories, also referred to as the scrap category. A vehicle that falls into this category is too damaged to repair and the parts of the car are, for all intents and purpose, useless and unable to be sold second-hand.
Category B is the next category for a written off car – it can also be referred to as the break category. Like Category A, the car is too damaged – specifically in terms of major structural damage that means the car isn’t safe for the road – to be repaired. However, the difference between the two is that, with an expert hand, some of the parts in a Category B write off vehicle could be removed and sold or reused.
Category S write offs stand for Structurally Damaged Repairable, which means that cars in this denomination are able to be repaired, due to there only being damage on the chassis and not anything more major.
Category N is the final category of write offs, standing for Non-Structurally Damaged Repairable. These vehicles also need to be repaired, just like those in Category S, but in this instance, the damage is only superficial and the car does not need to be re-registered once it is repaired.
Can a write off affect your car finance?
When a car is determined a write off, you will most likely receive a settlement price from your insurance company, depending on how your car was damaged. This price is how much they are prepared to pay you for the car.
If the amount they offer you is the same amount as you borrowed on finance to pay for the car, then you can simply pay off your finance plan with the money you receive. However, sometimes the amount offered isn’t quite enough to cover the finance borrowed, putting you in a shortfall situation.
For example, say you bought a car for £4,000 on finance and have already paid back £1,000 of that finance plan. When your car is written off, the insurance company offers you £2,000 as payment for the car, meaning that you still need to find £1,000 to pay your finance company after giving them the £2,000.
Additionally, until the car is officially written off, you will need to continue to make your monthly finance payments on the payment plan. If you don’t continue to make these payments, as per your contract, you could seriously damage your credit score, meaning that you may find it more of a struggle to get finance in the future.
What is the future for your finance plan?
The future beyond your write off depends entirely on the finance company you’re using and their approach to the situation. Some companies may be happy for you to use the money from the insurance company to buy a new car and continue the monthly payback payments as before.
Other companies may allow you to buy back your car from them, even if it has been written off, so that you can undertake the repairs yourself. However, this can only be done if the car is either Category S or Category N. If your car has been considered a complete write off – either Category A or B – then this option will not be available.
It is key to note that a finance company will want to continue the finance plan with you, so will most likely try to do what they can to help you. Make sure to approach them with suggestions for solutions and they may take you up on them.
You should also check whether you have GAP insurance. This is often offered as an add on to a finance plan and stands for Guaranteed Asset Protection. It’s designed to cover the shortfall between the amount your insurance company pays you and how much you have left to pay on your finance plan, so you’re not left out of pocket.
What should you do with your car once it’s written off?
After a write off, there are a number of different options available for your damaged vehicle depending on its write off category.
Category N and Category S cars can be repaired and resold to new drivers, as long as they are re-registered with the DVLA if necessary. Find out more about how to sell your Cat N or Cat S car.
If your car has been categorised as either A or B, you will not be able to repair or resell your car. Instead, the best option would be for you to scrap your car and reclaim/sell any parts that can be salvaged.
At Scrap Car Comparison, we can help you find the best-selling solution for your damaged car, no matter where in the UK you’re located. Simply click here to enter your Registration Number and find out how much you could earn from your damaged or written off car.