I totaled my car!
Here’s exactly what happened and seven lessons I learned from totaling my car.
I wasn’t on an epic trip to the Grand Canyon, Sedona, or Portland, like my last solo female RV roadtrip.
I wasn’t even hauling my travel trailer. I was home! According to National Highway Traffic Safety Administration, 52% of accidents happen within 5 miles of a driver’s home. This stat was true for me.
It was a Friday night, and I was doing laundry. Since living full-time in RV, I don’t currently own a washer or dryer, and use one onsite at the RV park.
Usually, I walk across the park to the laundry room to get some steps in, but this was right before Christmas, and I was exhausted running errands.
Instead, I drove. It was pitch dark and as I turned the corner; I ran into a small two- or three-foot pole in front of a fire hydrant. It was out of my line of sight because it was dark, and my SUV drives super high.
Even though I was driving around 10 mph, I hit the pole right into my transmission and this ultimately totaled my car.
It was a mistake! But as Henry Ford said, “The only real mistake is the one from which we learn nothing.”
This experience has taught me a lot!
Here are 7 lessons learned from totaling my car.
I’ll share these and hopefully you can learn from my mistake too.
1. Car rental insurance is a must-have.
When I initially setup the insurance plan on my car, I opted out of getting car rental insurance. At the time my thinking was, “I’m a safe driver, I’ve never been in a car accident, I don’t need this.” I had full coverage on the car, but no coverage to pay for a car rental.
This was also pre-pandemic where I figured if I had an accident, the car would be in the shop for a few days max.
Now from the pandemic labor and part shortages made this entire process super long. From the time I ran into the pole, it took almost three weeks for my car to even get looked at in a shop. Some collision shops didn’t have availability for two or three months.
I will always get car rental insurance coverage going forward!
2. How car insurance deductibles work
I had a $1,000 deductible on my car. Earlier in the year I filed a claim for my windshield to get replaced from a big crack. This was $343. Before my car was deemed totaled, I thought I’d pay out of pocket for a repair and assumed deductibles with car insurance worked the same way as health insurance.
I estimated I’d pay for repairs out of pocket of $657 (0r $1,000 minus $343). However, I learned expenses don’t rollover from one incident to the next. The $1,000 deductible is per event, even if it happens within the same year.
3. Actual Cash Value, Replacement Cost, and Gap Insurance
Insurance is boring! No one really thinks about it, until you need it! Next, from this experience I learned more on how car insurance policies work. Once my car was officially totaled through insurance, I received cash for the current value of my car. In the insurance world this is called, Actual Cash Value or ACV. This means I was paid out on the depreciated value of the car, or what it’s going for now in the market as a used car.
Replacement cost is how much it’d cost to replace the item without depreciation. Or what it costs to buy a new car at the current market price.
Why does this matter?
Let’s say someone buys a new car for $50,000 with no down payment. According to Car Fax new cars lose 20% the value within the first year and 15% every year after. Two years later the actual cash value is $34,000. They’d get paid out $34,000 and likely owe more than it’s worth.
Gap insurance is to cover the difference between the deprecated value and replacement cost.
4. Initial purchase price is important (always buy low!).
‘Buy low, sell high’ is a common investing strategy. It means you want to invest in something when the value is low and then experience gains as the value rises. People tend to do the exact opposite when buying a car.
Cars are depreciating assets, meaning the value declines rapidly. It’s common to buy high and sell low. Or in other words buying a new car is getting an asset at the highest value it’ll likely ever have. Then after driving it a few years the value sinks.
When it comes time to sell, or in my case the car is totaled, the value is drastically lower. Anytime you make a large purchase (like a home or car) it is worth it to evaluate the market to see prices to get the lowest initial purchase price.
I “bought low,” when I initially bought this car used. The car was originally listed at $16,700, but I waited a couple of weeks and the price dropped. I bought my car with cash in 2019 (a 2014 model) for $14,100.
A silver lining is my insurance paid me more than I initially paid for my SUV (even though I put on 45k + miles and drove for three years). They paid me $15,655 for my car or $14,655 after the deductible.
5. The current used car market is still over-priced!
I’ve heard a lot in the news about the car market, but I learned first-hand the car market is still crazy expensive right now. Due to supply chain issues according to CNN used car prices increased 45% by June 2021. Used car prices dropped 8.8% last year, but still have further to go to get back to pre-pandemic levels.
I’ve been searching for a three- to four-year-old used car and the prices are inflated. I’m not willing to spend around $30k for a used car with thousands of miles on it.
Founders of Car Edge, published a video, “Do Not Buy a Car Right Now, Wait 60 Days & Save,” outlining how rising interest rates are impacting car dealerships, which will eventually lower used car prices.
Another expert predicts a massive car-mageddon or car market crash due to car inventory increasing and car repossessions on the rise. Consumers who bought new cars above the sticker price or inflated used car prices, are now defaulting.
6. The cost to own a car is high.
When researching car prices, I realized how much I spend on driving, even without a car payment or maintenance.
Last year I spent around $30 a week on gas, or $1,560 a year. In addition to gas, there’s car insurance. My insurance increased long before the car was totaled. It’s about $150 a month or $1,800 a year. Together this alone is $3,360. This isn’t even including my car windshield replacement, new catalytic convertor, dead car battery, oil changes, and registration.
Or a different way to look at the cost of driving is the standard mileage rate. The IRS allows businesses to deduct 65.6 cents per business mile. According to Kelly Blue Book, the average car owner drives 14,262 miles a year. On average, with this the total cost of owning a car (including gas, insurance, car purchase price, and maintenance) is then $9,342 a year.
7. It’s time to slow down (on the road and in life)
The car accident happened when I was running around like a chicken with my head cut off to complete errands for Christmas. My schedule was packed, and I was overcommitting. It was a Friday night right after work I ran errands to prepare for three social events the next day!
This entire experience was a big reminder for me to slow down on the road and in life.
All in all, I learned a lot from totaling my car.
What’s next for me? In effort to slow down in life and avoid overpaying for a car now, I’m temporarily going carless! I’ll Uber, take the bus, bike, and simply do less running around for a couple of months. Doing the math, I can take multiple Ubers per month and spend around what I’d spend in insurance and gas.
If you’ve experienced a setback too, you’re not alone! Hopefully, it’s a lesson learned.
❤️ Carly
P.S. Save the date for the spring session of Best Money Class Ever, my signature live 4-week personal finance class. Next class will start live, April 19. Get the details here.
