My Car Is On Finance And My Engine Has Blown
Dealing with a blown engine is not something any driver wants to encounter, but it's important to know what to do if your car engine blows. You might find yourself overwhelmed with questions like, "What should I do if the engine blows on a financed car?" or "Is engine repair covered by the warranty? Will I need to pay the expenses, or is the car written off?" This article will answer your questions and leave you feeling prepared.
What are the options?
If you are left wondering "what happens when my engine is blown?" Your choices may be limited since the financial institution still holds the vehicle’s title. Maybe you’re thinking about getting the car fixed, but that’s going to be costly on your part. How about trading it or selling it for parts? The choice you make will depend on a number of factors. Before you decide, consider the following:
- How much will it cost you for the repair?
- What’s the projected equity after the work?
- What’s the car’s future value once it's in operating condition?
- And what’s the amount remaining when you've compared to your unpaid car finance balance?
Should I have my car fixed?
Rebuilding a blown engine could break the bank. Also, it usually takes a while for the mechanic to revive a car with a blown engine successfully. You have to be ready to wait for a number of weeks to a few months before you can use the car again.
You may choose to invest in repairs if you’re still a long way to go on your car financing. Does the amount you owe exceed the car’s value when operational? If it does, then it’s more sensible to have the car fixed. But what if you don’t have the funds for this? Here are some options you can consider.
Get an emergency loan
An option might involve getting an emergency loan for a car repair. It's important to keep in mind that you will be taking on additional debt while you’re still paying the lender for the car.
Check the car’s warranty
The car’s warranty is your best option, so you can protect your finances from a costly repair while you still need to pay the lender for car financing. Both used and new cars that have been bought from dealerships usually have warranties. Most garages will offer a 12-month warranty even on second-hand cars.
Also even if you bought second hand, do check the manufacturer’s warranty to see if it’s still valid. Many manufacturers offer much longer warranties these days, and also extended warranties, so you could be covered up to 10 years. But you might need to check if it has a mileage limit and requirements for regular servicing etc.
Maybe you have actually purchased extended warranties for your vehicle without realising it! These are commonly included in your monthly car finance repayment, and you may have forgotten that you bought them. It will save you a lot of money if you check for extended warranties first before spending your own cash.
Should I dispose of the vehicle instead?
This option might be better for you if you’ve nearly completed paying off the amount you owe the car financing company. You could sell it for parts at the junkyard, or scrap it entirely. Do first look to see if the value of the car when operational is more than the balance you’ve yet to pay. You can sometimes sell the car privately for parts, or upgrade it at the dealership. Let’s check your options. And remember you will have to pay off your finance first, as the car doesn't legally belong to you until you do, so you are not at liberty to dispose of it.
Trading it in
You can trade in your blown up car at the dealership if you’re nearly finished paying off your existing loan. The dealer will assess your vehicle, and if they see that they can revive the car at a lower cost, they can give you a good deal.
The retail prices that dealerships charge for auto parts are higher, but their wholesale costs are more affordable. The cash you can get out of it can help you in paying off the remaining balance you owe the car finance company. And if you still have cash left, you can then use it as a downpayment to a more reliable vehicle.
Selling the car as-is
Another option is to pay off the remaining finance and then sell the broken down vehicle to a private person. This may be a bit challenging because you would have to find a buyer who’s willing to work on making the car run again.
There won’t be a lot of buyers like this, so you may find it hard to charge much for the broken-down car. You would want to earn enough from the sale so you can pay for the remaining amount you still owe.
What you could do is get a personal loan before selling the car so you can have cash for the repairs. When the car is in good condition again, you can ask for a higher price. Selling it will allow you to pay off the personal loan, pay the remaining balance on your car finance so you can acquire the vehicle title, and then save some for your deposit on a new car.
Selling parts at the scrapyard
Before the scrapyard can take legal possession of the broken down car, you need to secure ownership of the car finance institution first. This means you have to pay your obligation completely before you can sell the car for parts.
Same as above, you can get a personal loan first so you can pay the balance you owe the lender. Once you have full ownership, you can take your vehicle to an auto salvage centre. The money you get for the car parts can pay then repay the personal loan and your deposit for a new car.
A car on finance with a blown engine can cause a lot of stress, but it’s not the end of the world. As you can see, you do have options on what to do next. What’s crucial here is that you know your limitations since you still owe the car finance company.
Secure the car’s title first if you plan on selling it for parts or as-is. If you have enough funds and the repair is not so costly, it makes more sense to get your car fixed. Then ideally, it would be better to get a new vehicle that is more reliable and safer for you to drive.
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