back to articles | May 08, 2024 | Moses Mwangi

Categories: Useful Automotive Information

What Happens If Your Financed Car Gets Stolen

While getting your stolen can be traumatic, the situation becomes even more distressing when your car is still under finance. Unless you take out GAP insurance when, you will have to continue making monthly payments when the vehicle is stolen.


Car theft is a common crime in the United States, with hundreds of thousands of vehicles stolen every year. In 2022 alone, more than 1 million cars were stolen in the United States, and almost half of those thefts were because of driver error.

While getting your stolen can be traumatic, the situation becomes even more distressing when your car is still under finance. Unless you take out GAP insurance when financing a car, you will have to continue making monthly payments when the vehicle is stolen. However, you will be free to sign a new agreement once you have paid off the remaining balance on your auto loan.

So, what happens if your car gets stolen while you are still paying the loan? Read on to find out.

What to do if your car under finance is stolen

In most types of car finance, you are not the vehicle's legal owner until the end of your agreement. You are only the registered keeper, meaning you have certain responsibilities if the car is stolen. Here are the immediate steps to take when your financed car is stolen.

Report the theft to the police

The very thing to do when you suspect your car has been stolen is to inform law enforcement by calling them on 101. The insurance company will only honor your car theft claim if you have filed a police report. Since police departments have different procedures, you might be required to file your police report over the phone or online.

Ensure you know basic details about your stolen car before calling the police. Details about your vehicle that will be helpful to the police include:

  • License plate number
  • Vehicle identification number
  • Make, model, color, and year
  • Any distinct features

You should also let the police know whether your car has a GPS device, as this can help them track down the stolen vehicle.

The police should provide you with a crime reference number and inform the driver and vehicle licensing agency (DVLA) that your vehicle has been stolen. Keep the crime reference number handy, as you will need it for insurance and any subsequent dealing with your loan provider.

Contact your insurance provider

Once you have reported the vehicle theft to the police, the next step is to reach out to your insurance provider. Inform them about the stolen vehicle and provide the necessary information, including the crime reference number.

While there is no such thing as "stolen vehicle insurance," you are covered for the stolen car if you have a comprehensive car insurance policy. However, even if you don't have one, notify the insurer about the theft. This will protect you if someone else is injured or property is damaged while the car is not in your possession.

Your insurer has three months from the date of contact to conduct an investigation and settle your claim. However, it might take longer for you to receive your settlement if they require more information or complications arise.

Depending on the policy, your insurance company should pay out the market value for the stolen car. This is the amount you could have gotten had you sold it, taking into account its mileage, age, and condition. Notify your insurance company immediately if the car is returned to you and they haven't paid yet.

Reach out to your lender

Like with your insurance company, it's important to notify your financing company about the theft. They should be aware of the situation since they have an absolute interest in the car. Failure to report the theft to the financing company might lead to penalties or breach of contract, potentially affecting your financial status.

The details you need to provide will be similar to your insurer: crime reference number, contact information, car details, and so on. They will also ask for confirmation from your insurance company that your car has been stolen.

As mentioned earlier, you will have to continue making your monthly payments while your claim is under review. If your insurer pays out or your car isn't recovered, you can use the settlement to pay off the remaining loan balance.

It's important to note that your insurance company won't consider your finance agreement when deciding how much to pay. Instead, they will consider your car's current value, meaning you could be short of the full amount required to pay off the loan.

Should you take out GAP insurance?

Guaranteed Asset Protection (GAP) insurance helps cover the shortfall between the amount you paid for the car or owe on the loan and the settlement figure given by your insurer when the vehicle is stolen. While this additional policy isn't legally required, it's worth getting one if you take out an auto loan to buy a car.

GAP insurance can give you peace of mind, knowing that your money is secure in case your vehicle is stolen. That is why it's always crucial to check whether or not GAP insurance is included in your insurance policy.

Suppose you want GAP insurance on your car but find out it isn't included in your policy. In that case, you can always arrange additional coverage from your insurance company.

How can you prevent your car from being stolen?

While it might be too late to keep your stolen vehicle safe, there are a few things you can do to ensure your next ride is safer from robbers. Here are some measures to prevent your car from being stolen and even reduce your auto insurance premiums.

  • Install a GPS tracking system
  • Park your car in safe places
  • Use a physical anti-theft device
  • Park in well-lit places or car parks with CCTV
  • Keep the key in a signal-blocking pouch if your car has a keyless entry
  • Avoid leaving your vehicle running unattended
  • Go with the potential buyer on a test drive when selling your car
  • Use deterrents such as alarms or steering wheel locks
  • Don't leave your valuables on show

Final thought

Getting a car under finance stolen can be a stressful and complicated situation. Therefore, it's important to act immediately by reporting the incident to the police, notifying your insurance company, and working closely with them throughout the process. In such circumstances, it's also crucial to review your insurance policy and loan agreement to know your rights and obligations. You can navigate this challenging situation and work towards solving the issue by following the necessary steps and maintaining open communication.