How much is it to buy back a totaled car from an insurer?

If your vehicle is severely damaged in a collision or other covered event (like a severe hailstorm or hurricane), it might be declared “totaled” by the insurance company covering the claim. This means the cost to fix the automobile exceeds its pre-incident resale value.

If the claim is approved, you can use the settlement to purchase a replacement vehicle. Or, you can buy back your totaled auto from your insurer – for as little as 10% to 25% of its fair market value sometimes – and restore it to roadworthy condition.

State law dictates how and when you can buy back a salvage vehicle, and doing so may not make financial sense. Likewise, declaring a vehicle a total loss – even if it’s drivable and in good condition – will affect its resale value, and some carriers will not insure an auto with a salvage title.

Key highlights

• An insurer declares a vehicle totaled when repair costs exceed a certain percentage of its actual cash value.
• Once your vehicle is declared a total loss, the insurance company will take ownership of it, and either offer a replacement or – if you want your old car back – provide a cash settlement based on its buyback value.
• Buyback value is based on a vehicle’s fair market value minus what it would be worth if sold for salvage.
• State law dictates whether or not you can maintain ownership of your totaled vehicle and what is required to drive it legally.

What does it mean when a car is declared totaled?

When an insurance company declares a vehicle “totaled,” it means the repair expense exceeds a certain percentage of its actual cash value (ACV) or pre-incident resale value.

“This doesn’t necessarily mean the car is undrivable. It might still be functional but considered not worth the cost of repairs,” says Dennis Shirshikov, a professor of economics and finance at the City University of New York/Queens College.

Carriers use one of two methods to determine if the car is a total loss (totaled). One is to establish a simple loss percentage threshold, typically equating to 70% to 80% of the car’s ACV.

“If repairs exceed that threshold, it is considered totaled,” says Michael Benoit, president of Pacific United Insurance. “However, state laws can impact this threshold. In some states, the threshold is lower for certain types of vehicles, such as trucks or SUVs.”

In other words, Benoit says, a vehicle that doesn’t seem badly damaged after an accident can still be written off as totaled.

Alternatively, car insurance companies may employ a total loss formula that evaluates whether a vehicle's repair costs exceed its cash value minus the salvage value. For example, if an auto is worth $17,000 and its salvage value is $7,500, but the repair estimate is $12,000, your insurance will declare the auto a total loss.

How do insurance companies calculate buyback value?

The buyback value represents your car's worth in its current damaged condition. It is the amount you will receive from an insurer if you want to retain ownership of your totaled vehicle rather than use the settlement to acquire a replacement vehicle.

Typically, this is calculated by determining the pre-damage fair market value of the vehicle, then subtracting the amount of money it would be worth if sold to a salvage yard for parts or scrap. Your insurer will also subtract any applicablecar insurance deductible. It will then return your totaled vehicle, along with the buyback amount. For example:

• Your car’s actual cash value: $15,000
• Estimated salvage value: $7,500
• Collision insurance deductible: $500
• Buyback value: $7,000

Buyback value can be as little as 10% to 25% of a vehicle’s fair market value, experts say, though it will probably be higher. But that amount will vary greatly depending on your vehicle’s particular:

• Make
• Model
• Year
• Physical and mechanical condition
• Market demand for salvage vehicles and parts

“You’d be surprised by how much the buyback value can vary,” Benoit says. “For example, if you own a luxury vehicle or a car with hard-to-find parts, the buyback price might be higher.”

How do you buy back a totaled car?

Time is of the essence if you want to buy back your vehicle from the insurer after it has been declared a total loss. Here’s how to proceed after you’ve filed a claim and it’s been approved:

1. Receive a settlement offer from the insurance company based on the vehicle’s ACV.
2. Inform the insurer that you want to buy back the car rather than accept their settlement.
3. The insurer will calculate your vehicle’s buyback value and present it to you for approval.
4. Once you accept the offer, you will receive the car back, but it will come with a salvage title, meaning it’s officially been declared a total loss.
5. Proceed with any needed repairs.
6. Have the car inspected and re-titled for road use per your state’s laws.

What to consider before buying back a totaled car

There’s a lot to think about before committing to purchasing back a totaled auto. Here’s what the pros recommend:

• Requesting estimates from multiple repair shops. Sometimes, the initial estimate doesn’t cover hidden damage, which could add hundreds or thousands of dollars to the actual cost of restoring your vehicle to drivability.
• Checking your state’s salvage title regulations. These will dictate whether you can retain ownership and what steps must be taken in order to restore your car to legal driveability.
• Shopping for insurance. Finding a carrier willing to insure your salvaged vehicle may be more difficult, and a policy could be quite expensive.
• Considering the resale value. Salvage title vehicles generally have lower market value, experts say. That may not matter if you plan to drive your car for years to come, but could be an issue if you need to sell it in the near future.

What are the alternatives to buying back a totaled car?

Buying back a vehicle declared a total loss isn’t a viable option for everyone. Instead, ponder these alternatives to buying back your car after it has been totaled:

1. Take the full settlement. If your vehicle has been declared a total loss, the insurer will ask if you want to replace it with a comparable model. Or, if you own your vehicle, you can accept a settlement offer for your car’s actual cash value and spend it as you please, and the insurer will retain ownership of your old auto.
2. Sell the car yourself to a salvage yard. Conversely, you may opt not to accept any insurance settlement and retain your nonworking vehicle to sell yourself for scrap or parts. This may yield a better price than what the insurance company offers you.
3. Donate the vehicle to charity. The salvage value could be used as a tax deduction.

Frequently asked questions

What happens if you total a car that is leased or financed?

If your vehicle is leased or financed, you will still owe money if it is totaled and the insurance payout doesn’t cover the full balance due. That’s why it’s essential to have gap insurance, which covers the difference between what the car is worth (its fair market or actual cash value) and what you owe.

For instance, if your auto is valued at $15,000 but you owe $18,000, gap insurance would cover the $3,000 difference. Although this coverage is optional for most drivers, lenders and leasing agencies often require it.

Can I drive a totaled car?

Just because an insurer has declared your vehicle a total loss doesn’t mean it is undriveable or beyond repair. For example, a car may be considered totaled because it sustained severe (and costly) cosmetic hail damage to the sheet metal and windows. Yet mechanically, it’s still as sound as before the hailstorm.

State law dictates whether or not you can drive a totaled vehicle and the steps required to make it roadworthy again. In Illinois, for example, a vehicle declared a total loss can be kept and driven only if it is at least 9 years old or has hail damage that doesn’t affect operational safety.

A totaled car can usually not be driven until it is repaired and inspected. Depending on your state's laws, it will likely need to be re-titled with a rebuilt or salvage title.