How Is Total Loss Value Calculated?

GIF shows two men in a mechanic's shop with a red car moving into frame. Text reads: "How total loss value is calculated: year, mileage, model, make, physical wear and tear, damage from accident"

Image by Michela Buttignol © The Balance 2020

If you’re in a bad auto accident that causes extensive damage to your car, your insurance company may decide to declare the vehicle a total loss – in other words, that your car is “totaled.” This means that the insurance company has decided it’s not worth the cost to repair it. But what does “not worth it” mean, and what factors are taken into consideration?

Calculating the total loss value of a car is not exactly easy, and may vary considerably by state and the insurance company. It is important to know how your vehicle's value is calculated because it can help you negotiate for a better payout on your claim. It can also provide info as to why you might not be getting enough money to pay off your loan.

Actual Cash Value

If you could sell your vehicle minutes before your accident, how much money could you get for it? 

Most traditional car insurance policies cover vehicles using actual cash value, deciding it’s not worth repairing your vehicle if the repairs will cost more than a certain percentage of the damaged car’s value, generally in the neighborhood of 80%. Exceptions include agreed value policies (usually for classic cars), stated value policies, and additional coverage such as gap insurance or new car replacement.

Actual cash value is another way of saying what the vehicle is worth at the time of loss. It is kind of hard to put an exact number on it without some help, but each insurance company has their own way of calculating this value. 

What Factors Determine A Total Loss?

Some things that insurance companies use to determine the actual value and the total loss value of your vehicle are its year, make, model, mileage, physical wear and tear, and damage caused in the accident.

If your vehicle is relatively new and in great condition, it will obviously have a higher actual value than a car that is old and worn out. If your car is total a beater, there’s a pretty good chance that your insurance company will determine that it isn’t worth fixing. 

But something to keep in mind is that cars depreciate quickly, and even a relatively minor seeming accident can total an older less expensive car. For example, if your beloved minivan has an actual cash value of $5,000 at the time of an accident that causes $4,000 worth of damage, it will likely be declared a total loss.

Tech Tools

Insurance companies use their own proprietary software to calculate the actual cash value of vehicles after an accident. Obviously, you can't use their software. But there are ways that you can get an idea of how much your vehicle is worth. You can check out the Kelley Blue Book value, or run a search on Edmunds, or Auto Trader as a reference. Checking local classified ads is also part of the process. Vehicles for sale which are of like, kind, and quality can be used as a base.

But don't get your heart set on the estimated value you find: these resources will only provide a ballpark figure. As almost any claims adjuster will tell you, insurance companies do not pay out claims based on Kelly Blue Book.


Any recent repair receipts you provide are also used to calculate your replacement cost. A new engine, new transmission, new tires, all can make a difference in the size of your check. If you recently replaced an expensive part of your vehicle, that may make all the difference in keeping your vehicle from being declared a total loss. 

A Few Words Of Caution

  • Unfortunately, it is not uncommon to receive a total loss payout check lower than your car loan amount. Such a situation can happen for several different reasons:
  • The car depreciating faster than the rate you are paying down your loan.
  • Extended car loans with rates.
  • Wrapping a prior auto loan into your current loan.
  • Wrapping other extras such as extended warranties, taxes, and title fees into your loan.
  • Little to no down payment auto loans.

Avoiding Short Falls

Both gap insurance, which makes up for the difference between what you owe and the car's actual total value, and new car replacement coverage can help you avoid shortfalls. They'll both combat the depreciation problem. Paying as much down as possible on your car purchase along with paying all warranties, taxes, and title fees will help you limit the amount you owe.