Crashing your car is stressful enough. If you’re still paying it off, the situation can feel even more overwhelming. Many New Mexico drivers are unsure who pays for the damage, what happens to the loan, or how insurance and lenders factor into the process.
If you’re asking what happens if you crash a financed car in New Mexico, the answer depends on several factors, including insurance coverage, fault, and the terms of your auto loan. Our team at Shapiro Law Team has created this quick guide to go over what typically happens after a financed car accident and the steps you may need to take to protect yourself financially and legally.
Call Now Request a Free Consultation
Most lenders in New Mexico require borrowers to carry collision and comprehensive coverage to protect their investment in the vehicle. If you have active auto insurance at the time of the crash, your insurance company will investigate the claim and assess the damage. If repairs are needed, the insurer typically issues payment based on your policy coverage.
Because the car is financed, the lender is often listed as a lienholder on the policy. This means:
If the damage is repairable, your loan remains in place, and you continue making monthly payments as agreed. Insurance covers the repairs, but it doesn’t pause or cancel your financing obligation.
In some cases, the insurance payout may not fully cover the remaining loan balance, especially if the vehicle has depreciated quickly.
Crashing a financed car without insurance can lead to serious financial and legal consequences. Because the lender still has a financial interest in the vehicle, the lack of insurance doesn’t eliminate your responsibility for the loan. In fact, it often makes the situation much more difficult.
If you don’t have insurance at the time of the crash, you may be personally responsible for:
Lenders typically require full coverage insurance as a condition of financing. If they learn the vehicle was uninsured, they may view it as a breach of the loan agreement, which can lead to added fees or forced insurance coverage at a higher cost.
Not only that, but driving without insurance is illegal in New Mexico. This can result in fines, license suspension, or other penalties, adding to the stress after an accident. If someone else was injured, you may also face claims or lawsuits seeking compensation for medical bills, lost income, and related expenses.
Situations like this can feel overwhelming, but working with a knowledgeable New Mexico lawyer can help you navigate the legal and financial challenges with clarity and confidence.
Call Now Request a Free Consultation
Whether you’re insured or not, a crash involving a financed vehicle in New Mexico often creates immediate financial responsibilities. Many drivers are surprised to learn that these obligations begin right away and do not pause simply because the car is damaged or undrivable.
Common financial obligations after a financed car accident include:
Even if the accident was not your fault, delays in insurance claims or disputes over liability can leave you paying out of pocket in the short term. Missing loan payments can quickly lead to late fees, damage to your credit, or repossession.
A financed car may be declared a total loss if the cost to repair it exceeds its actual cash value. When this happens, insurance companies typically stop considering repairs and instead issue a payout based on what the vehicle was worth before the crash.
If your financed car is totaled, your insurance company will usually send the settlement to the lender first. Since the lender owns a financial interest in the vehicle, they’re paid before you receive anything. This can lead to a difficult situation if the insurance payout is less than what you still owe on the loan.
Here is how a total loss scenario often plays out in New Mexico:
If you have Guaranteed Asset Protection (GAP) insurance, it may cover any remaining balance. Without GAP insurance, many drivers are left paying for a car they no longer have.
When your financed car is involved in a crash, and you do have insurance, your policy plays a big role in how the situation unfolds. Insurers typically use your collision and comprehensive coverage to pay for damage to the financed vehicle. Because you still owe money on the car, your insurance company will usually send any payout directly to your lender first to satisfy part or all of the loan.
If the payout doesn’t fully cover what you still owe, you may be responsible for the difference unless you have gap insurance, which is designed to cover that shortfall. Your insurance also determines whether you can repair the vehicle or if it’s declared a total loss.
Without proper coverage, you’re still on the hook for the loan and repair or replacement costs. Keeping your policy active and understanding what it covers can help prevent serious financial setbacks.
Call Now Request a Free Consultation
A car accident doesn’t directly impact your credit score. However, the financial consequences that follow can. Missed loan payments, unpaid balances after a total loss, or accounts sent to collections can all damage your credit.
Credit issues may arise if:
Protecting your credit often means staying current on payments while disputes or claims are resolved. If another driver caused the accident, a personal injury claim may help recover financial losses tied to the crash.
If you’re dealing with a financed car accident and legal questions, our attorneys at Shapiro Law Team can help you understand your rights and next steps. We provide superior representation and work to protect clients during some of the most difficult moments of their lives.
Dealing with a financed car after a crash can quickly become overwhelming, especially when insurance companies and lenders get involved. Understanding your rights and obligations can protect you from long-term financial damage.
At Shapiro Law Team, we fight for car accident victims and help them pursue the compensation they deserve. If you were hurt in a crash involving a financed vehicle, our Albuquerque car accident attorneys can guide you through the legal process and fight for your best outcome.
Call Now Request a Free Consultation
If insurance pays off your loan, you can typically apply for new financing right away. If there is a remaining balance, you may need to resolve that debt first, sometimes using GAP insurance or settlement funds from a claim.
The at-fault driver’s insurance should cover any damage to your financed car, but claims can take time to resolve. Typically, you’re still required to make loan payments until the insurance payout is finalized.
Yes, in most cases, you are still responsible for any remaining loan balance. If insurance doesn’t fully pay off the loan, you may owe the remaining amount unless GAP insurance applies.
Insurance pays the actual cash value of the vehicle, not the full loan balance. If the payout is less than what you owe, you’re still responsible for the rest. GAP insurance may cover the difference.
Driving without insurance is illegal in New Mexico and can result in fines, license suspension, or other penalties. Serious accidents involving injuries can lead to additional legal consequences.