Am I entitled to any excess amounts paid to a car dealerif the car is totaled?

UPDATED: Jun 28, 2011

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Am I entitled to any excess amounts paid to a car dealerif the car is totaled?

I recently financed a vehicle from a “buy here, pay here” dealership. A few weeks later my car was totaled in a rear in collision (not my fault). I originally put down $2000, plus I made 2 $130 payments. The car was $7,900 and the insurance paid out $7,400 (plus I had GAP insurance). Does the dealership get to keep a total of $9,660 (that they have been paid) for a car only costing $7,900? The owner is out of country and I’m getting the run around like they want to keep my down payment and start over? Can they do that?

Asked on June 28, 2011 under Accident Law, Georgia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

When a financed car is totaled, the lender/financer/dealership--whomever the payments are made to--is entitled to receive the full remaining balance amount due on the loan. Tbey may also keep any amounts paid to date. However, they are not entitled to amounts over that. To use two examples:

A car is financed. $2k is put down; $1k is paid by the time the car is totaled; the total financed cost of the car (total of all payments) would be $9k; at the time the car is totaled, it has a "blue book value" of $8k. (No gap insurance). Since the financed cost is $9k but $1k has been paid, the dealer is owed another $8k under  the finacing agreement. The $8k from totalling the car (since the driver gets its then value) will go to the dealer to pay off the remaining balance under the loan. The dealer has received and gets to keep a total of $11k ($2k + $1k + $8k) regardless of what the car's sticker price (if it had been bought for cash up front) or blue book value was. Nothing is left for the owner.

Same car, but at the time it is totaled, $7k in payments have been made, and because the car is older, it's value is now $6k. The insurer pays out $6k; the dealer is only owed another $2k (the original $9k owed under the financing, less the $7k paid); therefore the dealer would get $2k and the owner would keep $4k. Total, the dealer has received $2k down plus $7k payments plus $2k from insurance, or the same $11k as above, but the owner this time gets to keep proceeds.

So the dealer (or whomever financed) should get everything still due and unpaid under the agreement; they get to keep everything paid to date.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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