How to Buy a New Car after a Total Loss

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If you want to buy a new car after a total loss, you’ll probably want to wait until you receive your insurance settlement money. Your insurer will pay you the actual cash value and it may or may not be enough to cover the cost of a new vehicle.
Once you know your car’s actual cash value (ACV), you’ll be able to decide how you want to move forward with purchasing a new car—the make and model, price point, and whether you want to buy new or used. 
Of course, you’ll also want to protect your new ride with insurance, and Jerry can help you find the best deal on auto insurance without any hassles. To get you there, Jerry is breaking down everything you need to know about how to buy a new car after a total loss.
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What is a total loss? 

Insurance companies consider a car is a total loss if any of the following conditions are met: 
  • The cost of repair is greater than the value of the vehicle
  • The car cannot be repaired enough to be driven safely
  • State law deems there is enough damage to consider it a total loss
Many states use the total loss threshold to determine whether a car is totaled. This is a percentage of the car’s market value—and if damages exceed the threshold, the vehicle will be declared a total loss instead of being repaired.
The total loss threshold varies by state, but most are around 70% to 80%.

Does the car insurance company buy you a new car?

The insurance company usually does not buy you a new car to replace a totaled one. You can, however, use the actual cash value payout you receive from your insurer to put towards a new vehicle.
If you have new car replacement insurance, you’ll receive enough money to purchase a brand new car of the same make and model—minus your deductible—instead of just the depreciated value of your totaled car.

You were in an accident—now what?

Accidents can be scary and the aftermath can feel overwhelming. If everyone is safe, pause and take a deep breath. Here’s what should happen following an accident.

Call the police 

Calling the police is not something to avoid or overlook when you’ve had an accident. Not only is it the lawful thing to do, but it will also help your insurance company determine the ACV if they have an official accident report.

Call your insurance company 

Get in touch with your insurance company right away to begin the process of filing a claim. Ask your agent for the name of an insurance-approved towing company and mechanic. Having your car brought to a shop they recommend will speed up the process of declaring your car a total loss.
Find out if you have rental car reimbursement coverage to pay for a rental while you’re between cars.

Have a mechanic assess the damage 

A car is declared a total loss when the amount to fix the car is more than the car is worth
A certified mechanic will need to inspect your vehicle to determine the extent of the damage. The mechanic will usually communicate with your insurance company directly—and using a mechanic recommended by your insurer can simplify this process.

Determine the actual cash value of your car

Your insurance company will make the final decision about whether your car is a total loss based on its ACV. Several factors go into this formula:
  • Mileage on the odometer
  • Condition of the vehicle
  • Any upgrades or improvements you’ve made
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Get your paperwork in order

While the mechanic assesses your car and the insurance company crunches numbers, here are a few things you should do:
  • Find your title. Since the insurance company will essentially be buying the vehicle from you after a total loss, they will need the title. If you’ve financed your car, the title will be in the lender’s name.
  • Gather sales receipts, maintenance records, and photos of your car. These will help you demonstrate your car’s value. If you made major upgrades, share that with the insurance company as it will factor into the ACV and the final payout for your totaled vehicle. 
  • Research the value of the car. Do your own research into how much your car might be worth so you’re ready to either accept or negotiate the insurance company’s settlement offer. Kelley Blue Book and Edmund’s are two great resources.

Settlement and how to buy a car after a total loss

Once the insurance company declares the car a total loss and assesses its value, they will offer you a settlement. If you did your homework, you’ll be ready to accept the offer if it seems reasonable. If you think your car is worth more, be ready to show photos and receipts of the car’s condition and upgrades to back up your position.
After you sign a settlement agreement, you can expect a check to arrive in 2 to 4 weeks for the agreed amount. The check will be mailed directly to you if you don’t owe anything on the car and you can use it to purchase a new (or new-to-you) vehicle.
If the car was financed, the insurance company will send the check to the lender and you’ll receive anything over and above your outstanding loan.
If you still owe money on your loan after the settlement, you will need to pay the balance. This cost may be covered if you carry gap insurance. Otherwise, the burden of payment falls to you.
Key Takeaway Any money from your insurance settlement will first go towards paying off your car loan. If there’s a balance remaining, you’ll receive it by check.

Finding affordable car insurance

Once you’ve bought your new car, you’ll need insurance—and the Jerry app is a great place to start looking. 
As a licensed broker, Jerry will do all the legwork to find the best deals from 50+ top insurance companies. Once you make your pick, Jerry handles all the paperwork to get you set up with your new policy and can even help cancel your old one. 
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Your insurance company will auction your vehicle at a salvage yard after declaring it a total loss. By giving you the ACV, the insurance company is essentially buying the car from you. 
If you want to keep your car, you’ll need to contact your insurance company to advise them as soon as possible. Note that the car will receive a salvage title. You’ll need to contact the DMV to determine how to make the car safe and roadworthy to get the salvage title removed.
Generally, no. In rare cases, an insurer may replace a brand new vehicle that was totaled. Typically, though, you will agree to a total loss settlement with your insurance company and they will send you a check that you can use to buy a new car.
If you paid cash and/or owe nothing on the car, you’ll likely receive your settlement money in 2 to 4 weeks.
If you’ve financed the purchase of your car and still owe money on it, the check will go to the lender first. Any money beyond what you owe will then be sent to you. This process can take several months.
It’s best to keep your car insurance when you’re between vehicles. Ending your coverage without a new policy in place is considered an Insurance laps and can cause your premiums to increase.
The answer to this depends on you far more than your insurance policy.
If you have emergency savings, you can buy a new car right away. In this case, you can use the check that comes for your total loss vehicle to replenish your savings and be ready for the next unexpected event.
If you owe money on the car or need the money from the insurance settlement to purchase a new one, you’ll need to wait until the insurance claim is closed. Typically, settlement checks are sent within 2 to 4 weeks.

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