What Happens If Your Car Breaks Down And You Still Owe Money On It?


Your car loan outlasting the vehicle you used it to purchase is a dismal prospect. Having debt on a vehicle that was either totaled in an accident or broke down prematurely? No thanks! Unfortunately with the way the auto financing industry works, many Americans are buying cars that they can’t afford which leaves many in that predicament.

If You Find Yourself Upside Down On A Non Working Vehicle You Can:

  • Pay off the loan
  • Roll over the debt into a new loan
  • Leave the car sitting while you pay off the loan
  • File for bankruptcy

Your Options

Pay Off The Debt

Paying off the debt will be your best option, so if you have the money sitting in your account to pay off the debt, you should. Most of you reading this article don’t have that luxury, so here are a few options for you.

You can take out new form of debt with a lower interest rate to pay off your debt if you don’t have the cash in your account. In some cases you need the money in your account for bills, tuition or even to put towards a new car (one that we hope you aren’t getting yourself into more debt over. BUY USED PEOPLE). Regardless of why, in some cases taking out new debt to pay off your old is your best option, but we don’t recommend making a habit of this.

If your car isn’t paid off, you can’t even scrap it for parts or sell it before the loan is paid off because you don’t have the title of the vehicle. If you can take out a low interest personal loan or a 0% credit card to pay off your loan so that you can at least get some money out of the car, this may be the best option you have.

Whatever form of debt you take out, make sure you have a plan to pay it off and make sure you know what the fine print says on the loan should you fail to pay it off in a timely fashion.

Roll It Into A New Loan

You may be able to roll your old debt into new debt in a different way as well, using a new car loan. You technically can’t roll negative equity into a loan, but some dealerships may overinflate the value of the vehicle they are selling you to help you out with this.

You won’t ever get more that 125% of the new vehicle price for the loan but in some cases you can get an extra 20% of the vehicle price depending on your credit situation.

If you have bad credit this isn’t the option for you because no lender will give you more money than what the car is worth for collateral. If you are already upside down on a vehicle it is easy to understand why this is the case.

If you are considering doing this, they will have you trade in the vehicle for the new car even if it is totaled so that they can piece it out for parts and get some value out of it.

Pay Your Loan Off While The Car Sits

Another option is to just let the car sit in your garage or driveway while you pay off the loan. Once the vehicle is paid off you will get the title and you can do what you will with the car whether that is to piece it out for parts or sell it to someone interested in fixing it. You could also consider getting a tax credit by donating it to charity.

There are downsides to this strategy of course. The car is going to continue to depreciate the longer that it sits. You can also be subject to vermin like rats or wasps making a home out of your sitting car. You should keep in mind as well that you have to keep up to date tags on the vehicle and some level of insurance which can cost you hundreds per month. Finally you have to have a good place to store the vehicle and it may be a hug eyesore. This may cause your neighbors or even your landlords to complain and if you have a home owners association this is a huge no no.

You need to check with your neighborhood, your city, your county DMV and your insurance company to see what is legal and illegal in terms of letting a vehicle sit while you pay it off.

File For Bankruptcy

The final option that may help you out is to file for bankruptcy. While this solution may help you solve the immediate issue, filing for bankruptcy will hinder you when you next attempt to get financing. This will also be an issue regarding your other assets and debts like homes that you have a loan on or any other vehicles, RVs or boats. Keep this in mind.

You can file for chapter 7 bankruptcy if you qualify and the vehicle will be surrendered and the loan effectively cancelled. You will then owe nothing on the vehicle. You will want to look into what the implications are when filing chapter 7 bankruptcy click that link.

If you don’t qualify for chapter 7 bankruptcy, you can try to file chapter 13 bankruptcy which may offer a few solutions to your situation.

What Is Gap Insurance?

If your car was totaled in an accident, check to see if you have gap insurance.

Gap insurance is the type of insurance that covers financed vehicles on the difference between what is owed on the car and how much the vehicle is worth. Essentially, a vehicle may not be worth what a car owner currently owes on the car. In many cases gap insurance is a requirement for leased or financed vehicles.

The purpose of gap insurance is to cover any excess between what the car is worth and the loan amount still outstanding on the vehicle. This is important because insurance will only cover what the vehicle is worth and not what you owe regardless of whether the damage is caused by a natural disaster or a car accident.

Gap insurance makes up that difference between what is owed on a car loan and what the car is actually worth according to your insurance agency so that it may be replaced and you don’t end up in debt over a car that is no longer drivable.

What Does Gap Insurance Cover?

Now that you you understand what gap insurance is we can discuss what gap insurance will cover you for.

Gap insurance covers the difference between the market value of your car (which insurance will pay you if your car is totaled) and what you owe on your loan.

In other words, we can define what gap insurance covers as:

Gap Insurance Payout = (Amount Owed On Your Car Loan) – (Market Value Of Your Car)

Gap insurance does not cover specific parts. It covers the gap between what you owe on your car and the market value of it.

How An Extended Warranty Can Protect You From Being Upside Down On A Car

An extended warranty won’t help you the same way that gap insurance does in the sense that what they cover will be different. Gap insurance will cover you on a totaled car due to an accident, but what about if your car being totaled is just due to a part breaking like your engine block failing.

An engine block replacement can cost up to $10,000 to repair. Realistically for most consumers this number will be closer to $5,000. For many of us this cost can total a car that we aren’t finished paying off. An extended warranty will repair these damages and keep your car on the road.

The Basics On How An Extended Warranty Works

We’ve all heard the term extended warranty and usually the image that pops into our heads is getting endless calls from a robo dialer spamming us at all hours of the day. While some extended warranty companies do practice unsavory marketing practices, others can really be a valuable tool to have at your disposal.

Extended warranties come after the dealership or manufacturer warranty runs out on your car. Many car owners choose to purchase a 3rd party extended warranty at this time to help them cover the cost of their unforeseen repairs.

A car can break down at any time, even one that has been maintained appropriately and these repairs can be obscenely expensive. Extended warranties help people avoid going into debt over these car repairs.

Similar to insurance, with an extended warranty you will pay a monthly premium. When your car breaks down, you pay a small deductible of $100 to $400 depending on your warranty provider and they cover the rest.

Never Get Yourself Into Debt Over Car Repairs Again By Choosing Protect My Car

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Car repairs can be absurdly expensive, and you can expect those unexpected repairs before too long no matter what vehicle you drive.  Car repairs are an unfortunate part of owning and operating a vehicle. Eventually something is going to break and wow can it be expensive to replace and repair these parts.

If you have to replace the engine block it could cost you more than $10,000 depending on the make and model of your vehicle. Most people don’t have a spare ten grand lying around in their bank accounts, or even an extra $2,500 if their transmission blows.

The cost of repairs will depend on your vehicle, but it can cost you thousands of dollars to make repairs to components like the transmission and suspension, which is money most Americans don’t have.

If that cost seems absurd to you, luckily you aren’t alone. We’re on a mission to make car repairs more affordable to the every day working person. With Protect My Car, you don’t have to hold your breath every time that check engine light comes on. Protect My Car is basically an insurance policy for the mechanical features in your car. If your car breaks down when you have a policy with us you pay a deductible for covered expenses and we take care of getting the car repaired and covering the cost.

A vehicle service contract from Protect My Car can help cover the cost of these excessive repairs. In fact, you could pay as little as $100 dollars for that $5,000 engine replacement.

Yes, you heard that right.

For less that the cost of a cup of coffee each day, you can get coverage for:

  • Steering
  • Suspension
  • Engine
  • Transmission
  • A/C and Heating
  • Navigation and Electronics
  • …and so much more.

When you walk into the repair shop with a coverage plan from PMC, you can rest assured that you will never pay for these repairs listed here. You pay a $100 deductible, just like insurance and we pay the rest.

Does that sound like a fair deal to you?

If it does, just fill out the form below for a free quote, and see how great it can be to never have to pay for car repairs ever again. It couldn’t be more simple to get a quote from us and you could find yourself saving thousands of dollars per year on car repairs. Below this diagram you will find a button “click for a free quote” from there you can call us or simply get a hassle free quote online.

Protect My Car offers multiple levels of extended coverage for vehicles. The chart below outlines what those levels cover and how much the deductible will cost.

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About Protect My Car

Protect My Car is an extended auto warranty company. Our goal here at Protect My Car is to eliminate your worry of being financially responsible for an expensive mechanical breakdown. With our extended auto warranty, you don’t have to worry about being fully burdened with the cost of a covered repair.