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Why You Must Keep up The Payments on a Stolen Car

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#1 Hum

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Posted 26 April 2012 - 14:13

Question: I have gap insurance and my car was stolen. If the police find my car and it's badly damaged, what would happen with the car payments that are owed on the car? I am now two payments behind and owe $15,000 on the car. Should I continue to make monthly payments until my situation is resolved or stop paying?

Answer: You need to continue to pay your car payments and insurance payments on your stolen car until the situation is resolved.

Until your car loan is satisfied, you are obligated by the terms of your finance agreement to keep up with your payments, and your insurance policy needs to be kept until the stolen car is no longer registered in your name.

Withholding payment from your lienholder is a bad idea since it will show up on your credit history and make it harder in the future for you to get a car loan or car insurance policy at the best rate. Being behind on payments will complicate the claims process as well, and it could even bring suspicion of responsibility for the theft your way.

It's possible that your car will be recovered with only minor damage, and if that happens, then your car insurance company would pay for the repairs, under your comprehensive coverage, and return the car to you. If you stop paying on your car loan, you will be behind in your payments and in trouble with your lender.

If the car is recovered but found to be a total loss due to severe damage, or it is never recovered, you would also have issues with your lienholder if you failed to keep up with your car payments.

Your car insurance company will pay only for your car's actual cash value (ACV) in the condition it was in before the theft. If your vehicle's ACV is less than the $15,000 that you still owe on it, then because you were wise enough to get gap insurance this coverage should pay out toward the balance. It wouldn't pay it all, though.

Gap insurance doesn't pay for overdue car payments, so whatever amount you are behind in your payments wouldn't be paid out by your gap insurer; thus leaving you to pay this amount out of your own pocket.

Typically, a stolen car claim can take up to 30 days to settle, but it can be even longer if your insurer finds any "red flags."

Being behind in loan payments or other financial obligations may trigger a red flag and have your insurer call in its special investigations unit to do a more detailed investigation into the theft of your vehicle.

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#2 Stetson

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Posted 26 April 2012 - 14:19

Sounds reasonable to me. You car payment isn't paying for the car, it's paying back the loan you took when you bought the car. Stolen, wrecked, or whatever, you still loaned that money and owe it back until the insurance company pays it off.

#3 xendrome

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Posted 26 April 2012 - 14:21

Exactly, this is perfect sense, it's how the process works...

#4 Richard C.

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Posted 01 May 2012 - 16:17

Last time I checked if you purchased a car on finance, the company owns the car not you until it's paid off. This means that however it's recovered failure to pay means they can charge you for the damage and still take it away from you.

#5 giantpotato

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Posted 01 May 2012 - 16:27

Sounds reasonable to me. You car payment isn't paying for the car, it's paying back the loan you took when you bought the car. Stolen, wrecked, or whatever, you still loaned that money and owe it back until the insurance company pays it off.

You would be surprised how many people don't understand this. My sister works at a call center for Mastercard and gets calls from people wanting to remove a charge from their card because they broke whatever they bought.

Customer: Hi, I just dropped my iPod in the toilet, so I don't want to pay for it anymore.
Sister: Sorry, it doesn't work that way.
Customer: WHY SHOULD I HAVE TO PAY FOR SOMETHING THAT DOESN'T WORK ANYMORE :angry:.

#6 Geoffrey B.

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Posted 01 May 2012 - 16:31

i had a similar issue happen last year. My wife was hit by a drunk driver that had no drivers license or insurance. Her car was totaled however, the insurance was in litigation with the guy that hit her so they did not pay us until it was finished. we had to continue paying on the car and paying insurance for a vehicle that was totaled for 3 months.

Once things were finalized and the vehicle was payed off they reimbursed us for the monthly payments we made and we were able to purchase a new car.

#7 moloko

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Posted 17 May 2012 - 07:00

It up to the insurance company to call it quits on the car if it stolen. But it over 2 months now? what insurance you have. Just keep paying you will get your money if the car is totaled. If you get the car back..have it inspected and get everything documented.

#8 TCA

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Posted 17 May 2012 - 07:27

Sounds reasonable to me. You car payment isn't paying for the car, it's paying back the loan you took when you bought the car. Stolen, wrecked, or whatever, you still loaned that money and owe it back until the insurance company pays it off.


Only if his insurance covers stolen vehicles. Also, the car isn't his he has to pay the loan off then it's his 100%

@Hum: If the car is recovered with nothing wrong done to it. They can repo the car and auction it off at a lower price...But also, you can always get the info where it's being auctioned and get it back. Mostly banks or credit unions will send you a notice about you defaulting on your payments, if it goes 3 months unpaid you're screwed unless you work something out, but mostly they will want some of the money you owe or make it current. But wish you the best. I am assuming you live in the US if not, not sure how things go in other countries.