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

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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

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 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.


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