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A few years ago my dad’s 2002 Saturn was rear-ended and deemed totaled, despite the damage being fairly minor. His mechanic buddy fixed it up and the car was as good as new so he continued to drive it. When I moved to Wisconsin, my parents were in the market for a new car so they gave me the “totaled” Saturn for their new Honda CRV. The thing about totaled cars is that they cannot be sold so it was a win-win for us.
There are two interesting things about driving a totaled car. It is perfectly legal as long as you have liability insurance (covers you if you’re at fault). However, you don’t pay casualty insurance, which is bittersweet. It makes your insurance costs much lower, but if you’re in an accident and the other party is at fault, their insurance won’t cover it. This is a risky move but it does buy you some time to save if you don’t have money for a car right away.
Two weeks ago I was rear-ended in rush hour traffic on my way to babysitting (don’t tailgate people!). Fortunately, neither of us were hurt and the damage was minimal, minus a small ding on my bumper. The man who hit me preferred to not go through insurance (understandably since it will hike up his rates etc) so he settled with me for $250 in cash for cosmetic purposes – a number he deemed appropriate. Honestly, more than necessary on an 11-year-old car that I don’t plan to fix. But he was happy it wasn’t worse damage and he was happy I agreed to not use his insurance – he didn’t know that wasn’t an option for me.
You can bet that money went straight towards debt (with an exception of two small donations to charity events) and it’s also safe to bet I was relieved it wasn’t worse! If the damage had been worse I’d be out of a car and on my own to pay for a new one. Fortunately, I can afford to if I need to but I’d much rather that money goes towards debt for as long as possible.
Since I can’t sell my car even if I eventually wanted to, I plan to drive it until it’s very last mile. I will take great care of it and make this financial advantage work for me for as long as possible. When the day comes and it finally dies, I will be in a much better financial situation to either buy an older car outright or make a monthly car payment on something with more longevity.