What happens if my car is written off and it's on finance?

If your car is written off while under finance, your insurance policy won’t cancel your finance agreement. You must still repay the remaining balance, even if the insurance payout falls short.

You’re listed as the registered keeper (that means you’re in charge of the car’s condition and cover), so it’s your duty to keep the insurance active and contact your lender straight away. They need to know what’s happened. And until they give clear instructions, keep making your monthly payments. Stopping without agreement can cause serious issues, like added fees or damage to your credit file.

Insurance might cover some or all of your car’s value, depending on the type of policy you hold and how the accident happened. But the payout often falls short of what you still owe, especially if you bought the car recently and its value dropped quickly. That gap between your settlement and the finance left to pay is your responsibility (unless you have GAP insurance, which we’ll explain later).

Understanding Car Write-Offs

Your car is classed as a write-off when your insurer decides it's not worth repairing. This usually happens if fixing the damage would cost more than the car is worth.

Insurers don’t just look at severe crashes. Even smaller damage (like a dented door or broken light) can lead to a write-off. They often set the repair limit at around 50 to 60 percent of the car’s current market value. If repairs cost more than that, they write the car off.

Write-offs fall into four categories: Cat A, Cat B, Cat S, and Cat N.

• Cat A and Cat B cars are too damaged to fix. They must be scrapped or used for parts only.
• Cat S cars have structural damage but can be repaired safely.
• Cat N cars have non-structural damage (things like electrics, brakes or cosmetic panels).

Understanding the category helps you know how badly the car was damaged and what that means for repairs, resale value and insurance in the future.

Can you finance a category C or category D car?

You can finance a Cat C or Cat D car, but it’s not always easy. Many mainstream lenders avoid financing written-off vehicles because they see them as high risk.

These cars have been damaged and repaired, so their resale value tends to be lower. That puts lenders off, as the car acts as security for the loan. And if the damage wasn’t fixed properly, it could affect road safety too.

But some specialist lenders will still consider Cat C and Cat D cars, especially if the repairs meet safety and DVLA standards. You’ll usually need a detailed repair history, a valid MOT, and a car inspection report.

Do I still need to make monthly finance payments if my car is written off?

Yes, you must keep making your monthly payments, even if your car has been written off. Your finance agreement stays in place until your insurance claim settles and the lender confirms the next steps.

Stopping payments early won’t speed things up. But it can lead to missed payments, added interest, or harm to your credit file. And if your claim takes longer than expected, that could leave you in an even worse position.

You might feel it’s unfair to pay for a car you no longer drive. But by staying on track, you protect your credit and avoid extra charges.

What should I do if my financed car is a write-off?

So, what should you do if your financed vehicle gets written off? The answer is not to just cancel your monthly payments with your finance provider. Instead, there is an important list of steps you should follow.

1. Contact your finance provider

Start by contacting your finance provider. Ask for a breakdown of the outstanding balance and check how they’ve valued the car after the write-off. You might have room to dispute the figure or request a settlement review.

To support your case, gather the following:

• An independent vehicle valuation (from a trusted mechanic or dealership)
• A full service history (this helps prove condition and reliability)
• Proof of market value (such as similar listings on classified sites)
• Mileage and condition records (like recent MOTs or photos)
• Written confirmation from the seller (if you believe the car was worth more)

Then speak to your insurer. Share your evidence and push for a fair payout. And stay in touch with your finance provider throughout, they need to know what’s happening and may offer extra support.

2. Speak to your insurance provider

After you speak to your finance provider, contact your insurer to discuss your settlement and check for GAP insurance. GAP (Guaranteed Asset Protection) pays the difference between your remaining finance balance and your insurer’s payout.

This cover often makes a big difference. If your payout falls short, GAP stops you from paying the remaining balance yourself.

Insurers don’t include GAP by default. Many drivers buy it separately through a dealer or a third-party provider. Read your policy documents or ask your insurer to confirm.

3. Update the DVLA

Once you settle things with your insurer, you must update the DVLA. The law requires you to report a write-off and remove the car from your name if it’s no longer roadworthy.

You can do this online using the DVLA’s “write-off notification” service, or by post if needed. You’ll need your V5C logbook and the insurance claim reference. The DVLA will confirm when they update your records.

If you don’t tell them, you could face a fine. And your name will still appear as the car’s registered keeper, which could cause issues later.

4. Talk things through with your financer

Once you’ve updated the DVLA, speak to your finance provider again. Now that your insurer has settled the claim and the car is off the road, you can discuss the remaining finance.

Ask for a final settlement figure and review your options. Depending on the shortfall, your lender might offer a repayment plan, payment pause, or refinancing to help you manage the balance. Lenders don’t want long delays or unpaid accounts. Most will work with you to find a fair solution and keep your credit history in good shape.

What are my options if my financed car is a write-off?

If your financed car is a write-off, one option is to use the insurance pay out to clear the remaining balance on your vehicle. This section will talk you through some potential paths you can take.

1. Clear the outstanding balance

If the payout covers your full balance, you can clear the finance and close the agreement. Your insurer will send the money directly to your lender, or you may need to pass it on yourself.
But if the payout falls short, you must pay the difference. You can cover the shortfall in a single payment or speak to your lender about a repayment plan. Some lenders allow early part-payments to reduce the remaining term or monthly cost.

2. Buy the car back and repair it

If the payout doesn’t cover your balance or you want to keep the car, you can buy it back from the insurer. This option suits drivers who believe the car still holds value and want to repair it themselves.

Tell your insurer straight away if you want to buy the car. They’ll deduct the salvage value from your payout and confirm what you owe. Then check the car’s condition with a trusted mechanic before you commit.

Some damage might look minor but cost thousands to fix. If the repairs outweigh the car’s future value, you could end up losing more than you save.

3. Use insurance payout to buy a new car and keep paying your finance

If you’d rather replace your car than repair or settle the finance, you can use the payout to buy a new vehicle and keep paying off the original agreement. This option works best when the insurer’s payment falls short of your finance balance, but you still need transport.

Ask your insurer to release the payout to you directly. Then choose a reliable used car within budget, while you continue making payments to your finance provider. Some lenders approve this setup if you stay on top of your agreement and keep them informed.

This route helps you stay mobile without taking on a second loan. But it also means you’ll pay for a car you no longer own, so plan your budget carefully.

Can I appeal the decision to write off my car?

Yes, you can appeal if you believe your insurer made the wrong call. Raise your concerns early, before you accept the payout or sign any agreement.

Start by asking your insurer how they calculated the write-off and the car’s value. Then send your own evidence (like an independent valuation, photos, or a recent service record) to support your case.

If you want to keep the car, you can ask to buy it back. Your insurer will deduct the salvage value from your payout. But you’ll need to cover all repairs yourself and prove the car meets road safety standards before you can drive it again.

Summary

If you end up in this position and need further support on how to deal with cars written off under vehicle finance, don’t hesitate to reach out to Carplus today.