What happens if my car is stolen and I have a car loan?

Having your car stolen can be an ordeal at the best of times. But what happens if it’s stolen when it’s still under finance?

If you take out a loan to buy a car, the car technically doesn’t belong to you until the loan term ends and all the repayments have been made in full.

This can mean that in the unfortunate event that your car is stolen before you’ve paid it off, you are not only left without your vehicle, but also with the remaining debt to settle.

The way in which you can go about paying off the debt will largely depend on the kind of car insurance you have.

But before you get ahead of yourself, the most important thing to do if you find your car has been stolen is follow the appropriate steps, in order to prioritise your safety and fulfil the requirements of your insurance provider and car loan lender.

What should I do if my car is stolen?

1. Report the theft to the police – This is a crucial first step regardless of the kind of insurance you have and whether your car is under finance.
2. Take down the incident report number – Once you report the theft to the police, they will give you an incident report number which you’ll need to record so that you can pass it on to your insurer.
3. Begin your insurance claim – If your insurance policy covers theft, the next step is to start your insurance claim. Whether you can do this online or over the phone will depend on your insurance provider. Keep in mind that Compulsory Third Party (CTP) insurance does not cover theft. It’s important to have a good understanding of exactly what your policy covers so that you’re not left in the lurch.
4. Contact your loan provider – Once you’ve submitted your insurance claim, you’ll need to get in touch with your lender. They can then communicate directly with your insurer.
5. Await the result of your insurance claim – If your insurance claim is approved, your insurer should pay any proceeds directly to your lender.

What happens if my insurance payout doesn’t cover my debt?

If your insurance claim is approved, but the payout falls short of the amount still owing on your car loan, you will be liable for the gap. Likewise, if the payout is greater than the amount owing, you should receive the excess from the insurer.

One way you can protect yourself from potentially having to pay a gap on your car loan is with motor equity insurance, also referred to as shortfall insurance or guaranteed asset protection (GAP) insurance. Just remember to do your research an ensure it will give you the cover you need before signing up.

What if my insurance doesn’t cover theft?

If your insurance policy doesn’t cover theft, you will unfortunately have to pay off the remaining debt yourself. This could mean continuing with your regular repayments for the duration of the loan term until it is paid off in full, or paying it off faster such as in a lump sum – depending on your lender’s requirements and your personal financial circumstances.

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