Overhaulin'

Can I use my claim payout to buy new car?

Ok, it may seem like a stupid question, but this is my first wreck, and so I'm confused!!! Ok, so I drive a Kia Spectra. The Damage quote was $3800. The reality is, my car is really only worth about 6k, so I'm sort've stuck wondering why pay 4k to repair 6k car. I owe right under 9k on the car, so here's what I'm wondering. Can I take the check they're sending, trade in the car, and just pay off the difference on the loan and start fresh? I realize that's 3k out of pocket (or that I may have to roll over, but I'd get a cheap new used car anyways). I plan on contacting my agent, but they're out for the weekend so I just wanted to get some opinions. TIA!

Public Comments

1. Once you are paid for the damage, you can do anything you want with the money, as long as the lender does not object. In this case, you would be trading in the car, and the lender would be paid off, so there is no problem with you using the money as part of the deal, rather than paying to have the car repaired and then trading it in. In fact, you will most likely be ahead doing it that way, rather than trading a repaired car. The dealer, or the wholesaler who buys the car from the dealer, can get the repairs done for less than you can.
2. Maybe. Since you have a loan on the car, you must call the bank first, and ask them if, instead of fixing the car, you can just use the money to pay off the balance. They probably will allow this. Since you have a loan on the car, your insurance company is legally obligated to protect the financial interest of the bank, and therefore will not make the check out to just you. It will be a two party check, with yours and the bank's name on it.
3. Yes, Since you would be trading, your current lien holder would get paid off, so you can do whatever you like. You seem aware of the potential costs involved.