You’re slowly making your way through the mall’s crowded parking lot, searching for a space during the holiday rush. With your head looking one way for that coveted spot near the doors — and your car going another — you don’t manage to pump the brakes in time.
Next thing you know, you’ve accidentally tapped the car ahead of you with your front bumper.
In a small accident like this, you and the other driver might decide to settle things without involving insurance. But that means you’ll be stuck paying out-of-pocket expenses. Do you know how you’ll cover the repairs?
1. Wait
Postponing your repairs is only realistic if your car is the only one damaged, and the damage doesn’t affect your safety behind the wheel.
Waiting to fix cosmetic repairs gives you a chance to budget and save what you need.
2. Talk to Your Mechanic
Some mechanics are open to negotiating a payment plan when you can’t afford to pay off their bill all at once.
In some cases, they’ll set up financing that works like a personal loan. You’ll owe them the bill and agree to pay it off in chunks according to a set time. You may also have to pay a fee or interest, just like personal loans, too.
3. Put it on a Line of Credit
Your mechanic may not be willing to negotiate, or you may not be able to afford their financing plan. In this situation, you might consider putting your repairs on a line of credit. You should learn about your online options by comparing lines of credit before applying for one.
When Does it Make Sense to Pay Out of Pocket?
Insurance is there for a reason, but you might skip it in the following three situations.
1. The Accident is Minor
Backing into a bollard and chipping your paint. A small fender bender where no one gets hurt. A busted headline after you misjudge the size of your vehicle.
These are some examples of when you might skip insurance. No one gets hurt, the repairs are minor, and you can still drive away safely from the scene.
2. A Claim May Raise Your Insurance
If you’re the driver at fault, a claim with your insurance will almost always raise your monthly premiums. You can expect your rates to go up by about 15% on average. According to the International Insurance Institute, these increases may affect your premiums for three years after the accident.
If the long-term expenses of these premiums outweigh the upfront cost of the repairs, you might consider paying out of pocket using savings.
If you need a line of credit to cover them, crunch the numbers to see if your interest payments are less than your total premium increases.
3. Repairs Are Equal to or Less Than Your Deductible:
Many insurance plans require you to pay a little bit of the bill before they cover the rest. The average deductible is between $500–$1,000 but you may pay less or more depending on your plan.
In minor collisions, repairs may cost less than your deductible, so there’s no benefit to alerting insurance about your mix-up on the road. In fact, you could be losing money if your claim jumpstarts a premium increase.
The Takeaway:
Out-of-pocket repairs make sense in certain situations, but no matter how practical they may be, they can still be expensive. Remember these tips to help you afford your next at-fault collision.
