If you have a loan on a vehicle like I did, make sure you add "gap protection" onto your full coverage policy. It was never offered to me by my insurance, and I sure wish they would have.
In January of 2012, I purchased a 2004 GMC Envoy XUV from an individual whom did owner financing, and allowed me to make payments. He required $1500 as a down payment, and $350 due by the 7th of every month. Since my credit is not good, I cannot get traditional financing.
On February 21st, I hit an icy patch on the road after dropping my 3 year old off at preschool. I was going uphill, and didn't have any trouble going down the hill 10 minutes before. I had made 1 payment, plus the $1500 down payment.
Altogether it cost $13,000 minus $1850, leaving $11,150. The insurance company declared it a total loss. They said the cash value of it was $8500, and repairs would cost $8400. They ended up paying out almost $9,000. But I'm left paying the balance, and also without a vehicle since the insurance paid to the actual owner. If I would have had gap coverage it would have paid off the entire loan.
By Alicia from Lakeville, OH
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Always check Blue Book on any used car before you buy it. The insurance company paid you the Blue Book value on it. Knowing the Blue Book value before you buy, you could have negotiated the price down closer to the value of the car and then you wouldn't have needed gap either.
Maybe you paid too much for this vehicle in the beginning. Regardless, the owner got a lump sum payout, which, depending on their tax filing considerations, may be better for that original seller. You can do a lot with a lump sum vs the monthly payments they would have received.
So therefore your misfortune has been of benefit to them. I think you can use that as a bargaining point and ask that he void any further debt and call it even. That is what I urge you to pursue. Note how in the lottery, a lump sum payout is much less than the amount you would receive if you took the monthly payments, and it is analogous to that.
Also - are you sure you hit a patch of ice? Is there a possibility that you had a mechanical failure? Check to see if there are any recalls on that, or if work had been performed that later resulted in a malfunction. Perhaps the brakes failed. You did not specify, but please consider all angles.
And definitely ask the seller to forgive under the circumstances, since the insurance company did give him a payout. If the insurance was in your name and you are the owner, why did the payout go to them anyway? I'm not clear, perhaps I should re-read your post.
OK - I just reread your post and because it was owner financed. Is a financier required by law to at least offer the gap insurance? I'm not certain if you owe anything, really. It seems murky and I would check with your bank's loan or financial officer for some free advice.
Gap insurance can be purchased for very little from your insurance company!
I used to sell insurance and a friend of mine had just bought a new car and I knew they had been "rolling over" the balance on their previous vehicles every time they got a new one. I got her to put on gap coverage and 6 months later she came in to tell me her new vehicle had been totaled in what should have been a "fender bender" - the vehicle she hit had the rear tire pop off and a dented fender.
Gap paid off all of the auto loan and she just had to come up with a new down payment. She will never go without gap coverage again; but, she told me that she never would have paid the extra money if I hadn't convinced her it was worth it.
So, if gap is not offered by the lender talk to your insurance company!
Am so sorry you didn't know better to check the actual blue book value before making the purchase. If you could have financed the traditional way the loan company would have definitely checked the actual value because the vehicle would have been the collateral for the loan. They also would have told you about gap insurance.
IMHO the owner who financed took advantage of your situation. And I guarantee that if someone would have offered cash up front for the purchase the owner would have taken the $9,000.00 and called it good at the time of purchase. Anyone selling a car indeed knows it's true value. Also, since the owner received a lump sum payment they can no longer even try to say the extra charge was for financing. The financing only lasted for a month. Under the law and your circumstance that is called usury. Come to think about it you might want to set an appointment with a lawyer for a consultation. Most lawyers will give a free consultation.
As others have mentioned here you 'might' still have a remedy to have the rest forgiven so take the advice given and do the suggested investigations. Especially since you had only had the vehicle for one month and the true book value had not dropped yet.
*Anyway, you shared your story for a reason and that was to recommend gap insurance and that's excellent advice because the used vehicle value would have dropped greatly a year after financing (but not in the one month in your situation). So a big hug to you to sooth your pain and a thumbs up!
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