Monday, December 29, 2014

Total or Repair?

When your car is wrecked, should you get it fixed or just total it out and take a check?

A neighbor just got his car back from the shop - again.   It was in a wreck and he had a lot of work done on it, and then it needed to go back for frame work.   All told, he was without the car for nearly three months, which is not very long by car accident repair standards.

It is a 13-year-old car, which according to Kelly Blue Book (the highest of the car appraisal books) is worth maybe $4250 in private party sale in excellent condition.

I asked him why he didn't just let the insurance company total the car out and send him a check.   The cost of repairs and the hassle of dealing with it (as well as the problems with the frame issues) certainly give one pause.   With check-in-hand, one can simply go out and buy a similar car in similar condition.   

The reaction I got was interesting, but not unexpected.   "I wouldn't be able to buy a similar car for what they would pay me!" he cried.

Now think about this a minute.   They would pay him book value - the average retail value of the car.   He could go out and buy the same make, model, year, and color car and be back in the game again, within a week.  But this entire concept eluded him.

The reason why is that people tend to value things that are theirs more than they value others.  So to him, his 13-year-old Buick is a $15,000 car, because that is what he paid for it, thirteen years ago, and the idea of getting a check for "only" $4500 doesn't seem right.

Sadly, for some reason, he went after his own insurance company to make the repairs (and thus had to pay the deductible) even though the other party was at fault.   I would try, at least, to go directly to the other fellow's insurance company, and have them pay for the car, with no deductible.   And be sure to ask for compensation for your time and expenses, as well as "soft tissue damage" and any other injuries or medical expenses.

But maybe that is just me - I am more aggressive about these things.

I got into a wreck a few years ago, and the insurance company wanted to "fix" the car - and stupidly, I let them do this.  This was a car they claimed had a book value of $16,500 and for which I had paid $17,000.   They spent over $22,000 fixing the car, plus paid me for my expenses, soft tissue damage, and $3000 in "depreciated value."

At that point, I could have just asked for $16,500 and told them to keep the car, and in retrospect, I should have.  I kept the car another two years and sold it for $6800.   I would have come out ahead if I had taken the cash.   As it was, the car, while beautifully fixed, had further issues (rattles, an axle that needed replacement, etc.)   And with the recession, the car depreciated rapidly.   Cash would have been better.

If you get in a wreck, think about which option you want to take.   The insurance company will try to steer you to the cheapest body shop in the world, and while they may do "OK" work, there may be ancillary issues down the road (which are always hard to tie to the accident).   For example, I had my Camry repaired after a fender-bender and shortly thereafter the power window failed.  It felt like the body shop people had forced it open or something.   They claimed it was unrelated and fortunately, I was able to fix it myself.   But no matter how nice a job they do, it never is the same as new.

One problem with taking a cash payment is that you have to pay registration and title fees plus the sales tax, which can be a hefty 5-7% in most jurisdictions.   Negotiate with the insurance company on the amount of payout.   They will want to use low book value, such as Edmunds, private party sale.   You want to use NADA or KBB retail values.   Print out all three, and be sure to add in options and color and mileage, to show maximum value.

You won't come out ahead, of course, but at least you may be less behind in the deal.