We had a vehicle financed with American Honda Finance and the vehicle was a total loss. The day before, the payoff was $24,7xx. Once the insurance notified them it was a loss and they would be paying it off, they said the payoff was $25,5xx. I questioned it and they (lender) said the insurance payoff is different from the customer payoff.
Is this true and how can they get away with that? How can they add an amount to the loan based on who is paying it off? Seems like a shady way to get more money from insurance.
Posted by Radiant-Egg998
1 Comment
So lender or owner are only going to get what insurance deems ACV. If you own the car put that money towards a new car.
Now if it’s financed the lender will get first dibs at the payout. If it’s 24k and ACV is 24k, you get 0 but you owe nothing, it’s a clean slate.
Now if the payout is 24k from insurance and you owe 26k you either have to come up with the difference pretty quick(lenders don’t like unsecured loans) or maybe you have gap, which would kick in a cover the difference. Again $0 gained but you walk away clean.
Now if the $24k payout only has to cover a 12k loan, lender is some and you get some.
In the case of the payout, I would understand your loan agreement, pretty sure they bake some of the processing and title fees into the life of the loan but now you want to shorten the life. In some cases they can charge additional to cover the fees that you otherwise miss by cutting the terms short. Obviously the fees are less than the interest on the life of the loan so most people don’t bat an eye. You still pay less in the big picture.