Dave Says: Take the Bigger Check

Dear Dave,

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. 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. I’m on Baby Step 3 of your plan, and I owe nothing on the car. What should I do?

— Meagan

Dear Meagan,

Take the bigger check! 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.

If you had $19,000 in your pocket, would you go buy a $6,000 hail-damaged, salvage-title vehicle for everyday driving? 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. 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.

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. Go find yourself a nice car, hon. There are plenty of affordable, slightly used vehicles on the market right now. 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!

— Dave

Dave Ramsey

Dave Ramsey is an eight-time national bestselling author, personal finance expert, and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth, and enhance their lives. He also serves as CEO of Ramsey Solutions and is the author of numerous books including Baby Steps Millionaires: How Ordinary People Built Extraordinary Wealth–and How You Can Too.