Do I Have to Pay Sales Tax for Total Loss Vehicles?

Posted in Auto Insurance , Auto Insurance Claims

March 11th, 2009

If you’ve recently been in a car accident that resulted in your car being declared a total loss vehicle, then you’re clearly in a pretty lousy place. You’re glad you made it through without any injuries, of course, but now you’re faced with the serious hassle of all the auto insurance paperwork, finding a new car and your auto insurance rates possibly rising. Once you do find a new car to replace the one that was declared a total loss vehicle, you then are met by a new difficulty: paying sales tax on the new car, even though it is replacing a total loss vehicle.

Total Loss Basics

Unfortunately for you, you have to pay sales tax on the new car you get after your old one has been declared a total loss vehicle. The normal procedure – if you have standard comprehensive auto insurance coverage – is that your auto insurer will pay the sales tax and other ancillary fees on the new car, if it is of comparable value to your old one. If you can’t find a new car that matches your old one in price, many auto insurers will help you find a new car after yours has been declared a total loss vehicle. If you can’t find a similar new car, you will have to pay the difference between the price of the sales tax for your old car – the one declared a total loss vehicle – and your new one. If, for example, (referring to the diagram below) the sales tax on your total loss vehicle was about $2,000, and the sales tax on your new car is $3,000, your auto insurer will more than likely only pay you $2,000, and you will have to cover the difference.

Checking Total Loss Policies and Getting Good Auto Insurance Rates

Having your car declared a total loss vehicle by your auto insurance provider can be a real headache, and standards and procedures can vary from insurer to insurer. Before you commit to a specific auto insurance policy, be sure you go over it in great detail with your auto insurance broker so you can get the best auto insurance rates possible. When you do, explore what happens if your car is declared a total loss vehicle.