What Happens When Your Car Is Totaled? Know Your Options

When a car is declared totaled, your auto insurance company pays its Actual Cash Value (ACV) based on its market worth before the damage. From there, you can keep the car, sell it yourself, or let the insurer handle it as salvage.

In this guide, we’ll walk you through what to do when your car is totaled but still driveable, what happens to its title, and how it affects your insurance.

Accept the Insurance Payout & Move On

• The easiest option is to accept the settlement, let the insurer take the car, and use the payout to buy a replacement.
• The insurance company sells the car as salvage, so you don’t have to handle it yourself.

Appeal the Settlement

• If you believe your car is worth more, you can dispute the insurance payout.
• This is common for vehicles with aftermarket upgrades (custom wheels, audio systems, etc.).
• You may need to provide receipts or get an independent appraisal to support your claim.

Keep the Car & Sell It for Parts

• If you choose to keep the totaled car, you can sell its undamaged parts.
• Online marketplaces and salvage dealers buy parts from wrecked vehicles.
• Some insurers deduct the salvage value from your payout if you keep the car.

Sell It to a Junkyard

• If you don’t want to deal with selling parts yourself, a junkyard will buy the entire car.
• You may not get much money, but it’s a hassle-free way to get rid of the car.

Donate the Car to Charity

• Some charities accept salvaged vehicles as donations.
• If the car is still running, a family member or nonprofit may be able to use it.
• Donations may qualify for a tax deduction, depending on the organization.

Try Trading It for Another Car

• Some dealerships accept salvaged vehicles as a trade-in toward a new car.
• This is not guaranteed, as many dealerships only take cars with clean titles.

Repair the Car Yourself

• If you want to keep driving the car, you can repair it yourself or hire a mechanic.
• The car will need a salvage title, and some states require an inspection before it can be legally driven.
• Insurance may be limited—many insurers won’t offer full coverage on a rebuilt title car.

What Happens If Insurance Wants To Total My Car But I Want To Keep It?

If your insurance company declares your car totaled, but you want to keep it, you can request to retain the vehicle instead of accepting a full payout. This is common in cases of cosmetic damage (e.g., hail, minor body damage) or sentimental value.

How the Process Works:

• The insurance company will calculate your car’s Actual Cash Value (ACV).
• They will subtract the salvage value and your deductible from the settlement.
• You’ll receive the remaining payout and keep the vehicle.
• Your car will be branded with a salvage title (or a rebuilt title after repairs).

What You Need to Know Before Keeping a Totaled Car:

• Your vehicle will have a salvage title – Once totaled, the car’s title status changes to “salvage,” which lowers its resale value.
• Future insurance may be limited – Many insurers won’t offer full coverage on a rebuilt title car. Some may only provide liability insurance.
• You must disclose the title status if you sell it – Selling a car with a branded title without disclosure could lead to legal consequences.
• State laws may require repairs & inspections – Some states require an inspection before allowing a totaled car back on the road.

What If My Car Is Totaled, But Still Drivable?

If your insurance company declares your car totaled but it’s still drivable, you may keep it and repair it. However, driving it immediately is not allowed in most states until specific legal steps are followed.

Steps to Get a Totaled Car Back on the Road

• Obtain a salvage title – The insurance company will report the total loss to the state, and you’ll receive a salvage title, meaning the car is not legally roadworthy yet.
• Repair the vehicle – You must fix all damage before the car can be inspected.
• Pass a state inspection – Many states require a certified inspection to confirm the car is safe to drive.
• Apply for a rebuilt title – Once repairs pass inspection, the salvage title is converted into a rebuilt title, making it street legal again.

State Differences & Legal Requirements

• Some states require a second inspection after major repairs.
• States like California and Florida have strict rebuilt title requirements, while others like Vermont allow easier title conversion.
• Selling a rebuilt car requires full disclosure, or the seller could face legal action for failing to inform the buyer of the car’s prior total loss status.

Is Keeping a Totaled Car Worth It? Pros & Cons Breakdown

If your insurance company declares your car totaled, you have the option to keep it instead of taking a full payout. But is this the right choice? Here’s a breakdown of the advantages and disadvantages to help you decide.

Pros of Keeping a Totaled Car

• Lower Upfront Cost for Repairs
  • If the damage is mostly cosmetic (hail, minor dents), repairs may be cheaper than replacing the car.
  • In some cases, repairing your totaled car costs less than buying a new one with the insurance payout.
• No Need to Shop for a New Car
  • If you like your current car, keeping it avoids the hassle of buying another one.
  • Useful if your car is paid off and reliable despite the damage.
•  Potential Savings if You Repair It Yourself
  • If you’re mechanically skilled, DIY repairs could save thousands.
  • You may also sell undamaged parts for extra cash.
•  Good Option for Secondary Vehicles
• If you need a backup car for occasional use, keeping a totaled but driveable car could make sense.

Cons of Keeping a Totaled Car

• Higher Insurance Costs & Limited Coverage
  • Most insurers won’t offer full coverage (comprehensive or collision) for a rebuilt title car.
  • You may only qualify for liability insurance, limiting financial protection.
  • Some insurance companies won’t cover rebuilt vehicles at all, making coverage harder to find.
•  Hard to Sell or Trade In
  • Branded title cars lose significant resale value, even after repairs.
  • Many buyers avoid rebuilt vehicles due to concerns about hidden damage.
  • Dealerships and lenders often won’t accept rebuilt title cars for trade-ins or financing.
•  State Inspections & Title Challenges
  • In most states, you can’t drive a totaled car until you obtain a rebuilt title.
  • Passing a salvage inspection can be difficult and costly, depending on the level of damage.
  • Some states have strict laws on insuring or reselling rebuilt title vehicles.
•  Hidden Damage Risks
  • Even if the car looks fine, internal damage may exist (frame, airbags, electrical issues).
  • Future repairs could cost more than expected, making the decision to keep the car a financial risk.

What Is A Totaled Car?

A car is declared totaled when the cost of repairs exceeds a certain percentage of its market value or meets the insurer’s Total Loss Formula (TLF). This varies by state and insurance provider.

Insurance companies have two main types of thresholds, a simple percentage and a total loss formula (TLF)

Simple Percentage Threshold

• Some states use a fixed percentage to determine total loss.
• If repair costs exceed this set percentage of the car’s Actual Cash Value (ACV), it is declared totaled.
• Example: In Arkansas (70% threshold), a car worth $10,000 would be totaled if repairs cost $7,000 or more.

Total Loss Formula (TLF)

• This method compares the cost of repairs + salvage value to the car’s market value.
• If the sum of repair costs and salvage value is equal to or greater than the car’s ACV, it is considered totaled.
• Example: A car worth $10,000, with $6,000 in repairs and a salvage value of $4,500, would be totaled because the combined amount ($10,500) exceeds the ACV ($10,000).

Here is each state’s total loss threshold:

Example Scenario: How Total Loss Works

Scenario 1: Florida (80% Threshold, Leased Car)

• Car’s Actual Cash Value (ACV): $10,000
• Repair Costs: $8,500 (over 80% of the ACV)
• Insurance declares the car totaled and pays out $10,000 to the lender.
• If the driver owes $12,000 on the lease, they still owe $2,000 unless they have GAP insurance, which would cover the difference.

Scenario 2: Texas (100% Threshold, Owned Car)

• Car’s ACV: $10,000
• Repair Costs: $9,500
• Because Texas has a 100% threshold, the insurance company does NOT total the car and instead pays for repairs.
• The driver keeps their repaired car instead of receiving a payout.

What Happens To The Title When A Car Is Totaled?

When a car is declared totaled, its title is changed to a salvage title, indicating that the vehicle has sustained significant damage. The process varies by state, but in most cases, the title is handed over to the insurance company, unless the owner chooses to keep the vehicle.

If the Insurance Company Takes the Car

• The insurer reports the total loss to the DMV, and the car receives a salvage title.
• The insurer sells the car at auction or to a salvage yard, where it may be stripped for parts or repaired and resold.
• The original owner receives an ACV payout and no longer owns the vehicle.

If the Owner Keeps the Car

• The owner retains the car, but the DMV brands the title as salvage.
• The car cannot be legally driven until it passes a state-mandated inspection.
• Some states require the title to be reissued as a “rebuilt title” after repairs are complete.

Who Gets The Insurance Check When A Car Is Totaled?

When a car is totaled, who receives the insurance check would depend on who owns the vehicle. If you are in the middle of a lease, the finance company or the bank that still owns the note will receive the payout. If the check exceeds the balance, you will receive the overage. If you own the car, you will receive the entire payout.

For example, you own a vehicle that is under a lease. You have an accident that renders your vehicle a total loss. When your insurance company inspects your vehicle, they determine your damages are $6500.

However, the market value of your vehicle is $5000. Even though your damages are $6500, they will write you a check for $5000 because that is what the vehicle was worth at the time of the loss.

This check will often go to the lease company, especially if you still owe money on your lease. If you own the vehicle, you will receive the $5000 minus your deductible and any applicable fees. ‘

As we learned earlier, the Gap insurance will pick up the remaining balance due should you owe money to the finance company regardless of the market value of the vehicle.

Keep in mind the total loss formula table above, and each state’s threshold. How much your insurance company pays you for your vehicle weighs heavily on that table as to whether you will owe your car company on a lease.

This is why Gap insurance is important because it would help you pay off what you owe on a lease should your insurance leave an amount due after they pay the lender.