A major financial pressure for many people involves the vehicles they use for transportation or work.
There seems to be no end to the number of decisions car buyers and owners are faced with navigating.
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The debates center around whether to lease or buy (used or new), what type of car to purchase, what insurance to get, whether to pay cash or start a payment plan, and so forth.
In one particular instance, car owners must make a decision many haven't thought completely through. That concerns what to do about a car severely damaged by a hailstorm.
And a big nuance to this can often occur in such a situation if a vehicle owner needs to consider whether to receive a car salvage title.
This is a title one might receive if an insurance company determines your car to be sufficiently damaged so that the cost of repairing it is higher than what it is worth.
A car owner seeking advice from personal finance personality Dave Ramsey recently asked him about just such a scenario.
"Dear Dave," she wrote, according to KTAR News in Phoenix. "My car was declared totaled because of hail damage, and my insurance company says I have two options. One is to take a higher total loss settlement check of $19,000 and use it toward the purchase of another car. The insurance company would then take possession of the car."
"The other option is to accept a check for $13,000 and have the car on a salvage title," she continued, identifying herself as Meagan. "The car is worth $15,000, and I have 20% car replacement assistance on my policy that increases the total loss settlement to the $19,000 amount I mentioned earlier. What should I do?"
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Ramsey's simple advice: 'Take the bigger check!'
Ramsey had a very quick initial answer and then expanded on it a bit.
"Take the bigger check!" he wrote. "That’s a quick and easy decision, but give me a minute to explain why. It's not about being greedy — it's a little more complicated than that."
Ramsey presented the question in a slightly different light.
"If you had $19,000 in your pocket, would you go buy a $6,000 hail-damaged, salvage-title vehicle for everyday driving?" he asked. "Of course, you wouldn’t do that! The insurance company is probably hoping you’ll overlook the $19,000 offer and essentially pay $6,000 for this beat-up car. No. Thank. You. I’ll pass on that deal."
"With $19,000, you'll have plenty of cash to rent a car for a couple of weeks and take time to find a great-quality used car at a good price," he added. "You might even be able to negotiate with the insurance company to give you a little time to look for another ride before they come pick up the old one."
The best-selling author and radio show host then took a little time to explain why Meagan should not feel compelled to keep the damaged vehicle.
"But no, you don't want that messed up, old car. Why would you? That thing probably looks like a kid with a bad case of acne right now," Ramsey wrote.
"Go find yourself a nice car, hon. There are plenty of affordable, slightly used vehicles on the market right now," he continued. "There's no reason for you to drive around in something that's all beat up if you don’t have to."
"Best of luck, Meagan!"
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