Having your car stolen can be extremely stressful and disruptive to your daily life. But the situation becomes even more complicated if the stolen car was financed or leased – and you lacked proper insurance coverage.
Unfortunately, even if your financed vehicle gets stolen and never recovered, you are still responsible for making the loan or lease payments. Without insurance to help replace the car, this leaves you in a difficult bind.
This article will explain what happens when a financed car is stolen without insurance, your ongoing obligations, and steps to take to protect yourself.
Insurance Needed for a Financed Vehicle
With any financed auto loan or lease, full coverage car insurance is a standard requirement to get approved. Lenders want to ensure the asset backing the loan (your car) is protected in case of theft, damage or total loss.
The two key coverages required are:
Comprehensive – Covers theft, vandalism, weather events and other non-collision losses. This is needed to get compensation if your car is stolen.
Collision – Covers damage to your vehicle from accidents. Requires a deductible payment.
Together, comprehensive and collision provide “full coverage” to safeguard a financed vehicle. Liability insurance only covers damage/injury you cause to others – not to your own car.
Without full coverage insurance, you have zero protection if your financed vehicle gets stolen or damaged. Yet you still owe thousands of dollars on the loan or lease.
What Happens If Your Financed Car is Stolen
When a financed vehicle is stolen, here’s what happens with and without insurance:
With Comprehensive Insurance
- File police report immediately on stolen vehicle
- Notify your insurance company of the theft
- Insurance will investigate and declare the car a total loss after a set time period if not recovered
- You will receive a check for the actual cash value of the car, minus your deductible
- The payment from insurance will satisfy the loan or lease
- You can use the insurance payout to buy a replacement vehicle
Without Comprehensive Insurance
- File police report on stolen vehicle
- Contact financing company to report theft
- You continue making monthly payments on the stolen vehicle, despite having zero access to it
- If recovered, any damage repairs are your responsibility
- If never found, you still owe the full remaining loan balance after a set time period
- Your credit takes a major hit if you default on the payments
As this shows, lacking comprehensive insurance on a financed vehicle leaves you in a financial nightmare if it’s stolen. Never expect the financing company to forgive your debt – they will demand full payment.
Why Stealing Financed Cars Is Common
Professional car thieves often target new, financed vehicles for a few key reasons:
Resell value – Newer models in demand bring higher prices on the black market. Luxury brands like BMW and Mercedes are hot targets.
Harder to track – Cars with financing liens are often not immediately reported stolen by owners eager to avoid payment obligations. This delays police recovery efforts.
Paperwork delays – Financing companies often take weeks to formally declare a stolen financed car a total loss and pay off the lien. This opens a window where the car can be resold multiple times illegally.
Owner desperation – Knowing owners still owe loan balances, thieves can ransom stolen financed vehicles back for a price lower than the remaining payments but high enough to profit.
While having comprehensive insurance won’t prevent theft, it provides the key financial protection to avoid catastrophic consequences.
What Should I Do If My Financed Car is Stolen?
If your financed vehicle is stolen, here are important steps to take:
Report it to police immediately – File a stolen vehicle report right away. This gets the recovery process started quickly before thieves can cover their tracks.
Notify your financing company – Per the terms of your loan or lease, you are obligated to inform them of the theft. Ask about any required documentation.
Call your insurance company – If you have comprehensive coverage, start your claim immediately. Provide all details and the police report case number.
Check coverage limitations – Review your insurance policy documents for any theft coverage limitations, like waiting periods. These may delay or reduce your payout.
Ask about loan payoff process – Find out from both the lender and insurer how and when your balance will be paid off if the car isn’t recovered.
Continue making payments – Unfortunately, the loan/lease company can require payments until any insurance settlement occurs. Defaulting harms your credit badly.
Invest in gap insurance – If you get another financed vehicle, pay extra for gap coverage to protect against any shortfall between the vehicle value and loan amount.
Improve antitheft measures – Steering wheel locks, vehicle trackers, locking wheel lug nuts and other deterrents make your next vehicle less appealing to thieves.
Filing the police report creates important documentation. But only comprehensive insurance can help you recover financially if thieves aren’t caught.
What If I Stopped Making Payments?
Some owners facing months of payments on a stolen, uninsured vehicle they can’t use choose to simply stop making loan or lease payments.
This is extremely risky and damages your finances. Here’s what happens if you default:
The lender will repossess the vehicle if recovered and charge fees/penalties allowed by law
Your credit score plummets making it harder to qualify for future loans or leases
The lender can pursue legal action and garnish your wages to recover the debt
You may owe interest charges and attorneys fees on top of the balance
It becomes difficult to obtain financing in the future due to the default on your record
While it may seem unjust, stopping payments goes against the loan contract and leaves you worse off. Maintain contact with the lender to explore options, but realize the debt obligation remains.
How to Prevent Theft of Financed Vehicles
While comprehensive insurance should be mandatory, there are also smart steps you can take to avoid having your financed vehicle stolen in the first place:
Never leave the car running unattended to warm up – thieves take seconds to jump in and drive off
Install an alarm system or tracking device to deter thieves and help recover the vehicle
Park in busy, well lit areas rather than isolated streets or lots
Use wheel locks and pedal locks to make driving off extra difficult
Hide valuables and don’t leave anything visible in the car Interior
Ask about theft protection packages when purchasing from a dealer
Always lock doors and close windows – don’t make it easy for thieves
Keep only minimum personal info in the car to avoid identity theft if stolen
Maintain the car well so it doesn’t stand out as an easy target
Reducing the likelihood of theft is ideal. But comprehensive insurance is still essential as a safeguard for any financed vehicle, given the massive financial risk.
Your Legal Options if No Insurance Payout
If your financed vehicle is stolen and your insurance provider denies your claim or refuses to pay out the value, all may not be lost.
Insurers can wrongly deny comprehensive claims – an illegal practice called “bad faith.” If you believe the insurer is unfairly denying your financed car theft claim, an attorney may be able to help you recover a settlement and hold the insurance company accountable.
Likewise, if the financing company fails to follow proper procedures in your case, or demands overly excessive payments after theft, a legal consultation could be beneficial to assess if they violated any applicable consumer finance laws.
While owed payments can’t simply be made to “go away,” a lawyer may find leverage to negotiate a settlement that avoids further harm to your finances.
Protect Your Investment
Having a vehicle stolen while still tied to a loan or lease obligation can quickly become a financial nightmare. That’s why comprehensive coverage paired with theft deterrents is so crucial for financed cars.
Never assume “it won’t happen to me” – car thieves are opportunistic and target perceived easy targets. Take proactive steps to safeguard your investment. Then you can have confidence that either your insurance or security measures have you covered.
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