The TV commercials are all over the networks showing two friends chatting away oblivious to what is happening around them and WHAM another car smashes into the them while air bags are going off with blank looks coming from their faces. The ads apparent purpose is to demonstrate how safe this car is with front and side air bags with reinforced doors and multiple safety features where the driver and his passenger are able to walk away from it without an injury. This little 60-second commercial is over, but what happens next in the real world?

Following this scenario a little further, Bob and Ray, the passengers, walk away unscathed. Bob reaches for his cell phone and calls the police. An officer shows up in an hour and commences to fill out a traffic report. Insurance information is exchanged and a traffic police report is given to all the drivers involved in the accident. This is a no fault auto insurance state. Blame is immaterial other than for assigning moving violation tickets. No tickets were issued, as this was a nasty intersection with five to ten accidents per week. Something should be done Bob mused. Bobs car is not operational. Everything is smashed and it looks like the frame is bent and twisted sideways where the front wheels are going in different directions. When the wreck occurred it caused a chain reaction in the rear and Bobs trunk became pushed up into the back seat. No drivers were injured however.

Bob calls his insurance company to report the accident. After submitting to twenty questions and sharing the accident police report number Bob is advised to have the disabled and wrecked vehicle hauled to a frequently used facility where the auto insurance adjuster can view the damage and write a report as a basis for settlement and repair. Bob calls a wrecker and gets his smashed up auto to the recommended storage yard that doubles as a gas station and auto service. Upon arrival, Bob and Ray wait for a ride home from Bobs wife who leaves work early to pick him up. Both Bob and Ray are still shaken by the near fatal experience.

The adjuster showed up at the storage yard the next day armed with a laptop and portable printer. Ray had to get a rental car till he got his car back in order to get to work and such. At work Ray received a call from the adjuster. The adjuster, Mr. Peabody, said the car was a total loss with nothing but salvage value left. The insurance adjuster went on to explain how the company set the values based on retail and wholesale composites with adjustments for mileage, upgrades, and such. With the conversation winding down, the adjuster stated the company was prepared to write a check to Bob and his lender for $14,500 including the salvage rights of the vehicle already reduced by the deductible. Bob began to argue and protest with the adjuster. Bob called his agent and further continued his rancor regarding the low payoff. Again, the insurance company emphasized the facts, with the insurance adjusters report in hand they were offering all that was possible. Bob was told, take $14,500 or nothing, as they would not pay one penny more. Bob called his agent again. Perhaps the adjuster was just having a bad day. Bob had been a loyal customer of the insurance agent for over twenty years. Bob pleaded to have another insurance adjuster look at it and perhaps with an eye to using even more used parts in the cars repair. The agent agreed to give it a try even if he had to pay the adjuster out of his own pocket. Two days later, Bob received another call from work, this time the adjuster had discovered some minor damage with the engine and air conditioning system and the wire modules although prior market value remained the primary concern. These new findings may impact the salvage price. This adjuster was indicating a value of $13,500 after the deductible. Bob was really stoked and called a school buddy who was now a local attorney and shared his story. Attorney Roy said he would call the insurance company to see if he could boost the payoff. Insurance companies have a bevy of attorneys who specialize in small print all ready to battle. Attorney Roy with a few calls and faxed letters representing a shot across the bow of the insurance legal department was able to get the payoff up to $15,500 with little hope of getting any more. Bob settled and signed the check over to the bank.

Like many American drivers who have financed their vehicles, they owe more than the car is worth. This is called being upside down. As it turns out, depending on how the wind blows, Bob was trading cars like every two years. Over time, to make deals at the dealership, the shortage of value of the trade-in was added to the new debt and rolled forward in a new car loan all with lender underwriting and approval. The house of cards is built one deal at a time. With most borrowers being payment sensitive, longer terms are sought to keep the family budget in line as a possible justification for making the purchase. However, as in this case, the value of the vehicle turned out to be $9,400 short of paying the debt off of $24,900.00. The house of cards began to fall. Bob had been paying $567.91/month for over a year now and had 60 months to go. With the lien holder getting all the money, that would leave $9,400 left or roughly 17 payments to go on what turned out to be dead money.

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