My car was totaled. Do I have to pay back the car loan?

Q. I had a car loan and then I had an accident. The insurance company paid for the value of the car to the lender, but this amount did not totally cover the loan. Do I have to pay back the rest of the money?

— Driver

A. We’re sorry to hear about your accident and we hope you weren’t injured.

Unfortunately, if your car is deemed to be “totaled” by the insurance company, it is only responsible for paying the actual cash value of the car.

A car is typically determined to be “totaled” if it will be unsafe to drive even after repairs, or if the cost to repair it is more than it’s worth, said Charles Pawlik, a certified financial planner and chartered financial analyst with Beacon Trust in Morristown.

“The actual cash value is essentially the amount you would need in order to purchase a comparable used car,” Pawlik said. “You would be responsible for paying any remaining balance of the car loan to the lender above and beyond this amount.”

This assumes that you do not have gap insurance on the vehicle, which can pay for the difference between the actual cash value of your car and what is still owed on the car loan, he said.

“This can be important coverage to obtain in order to protect yourself if an accident occurs in the future, particularly if you will not be putting a large down payment towards your replacement vehicle,” he said. “It is also important to check the insurance company’s valuation of your vehicle to ensure you are not being offered/given less than you are owed.”

You can check the actual cash value of your vehicle on websites such as Kelley Blue Book to determine the estimated value of your car for both a private sale as well as the car’s dealer trade-in value, he said.

He said it’s important to ensure that you are as accurate as possible when inputting the details about your car on sites like this, including mileage and any optional features that the car has.

“You can take the average of the estimated private sale and dealer trade-in values to provide an estimate of what the actual cash value of the car may be,” he said.

Email your questions to [email protected].

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for’s weekly e-newsletter.

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