I assume you are implying that not repairing a financed vehicle puts the lienholder at risk because the collateral is worth less than it would otherwise be? Not a problem, they have already thought of this and a fix is in place to protect the lienholder. I won’t go into details because that would be a major hijack. But the only way for a lienholder to suffer an actual loss is for them to repossess the vehicle and find that it has been damaged prior to the repo. This type of loss is settled fairly between the insurer of the car and the lienholder. Noi worrios I assure you, cry not for the bank! A lot of times an insurer will put both the car owner’s name and the lienholder’s name on the settlement check. That way the car must be repaired before the lienholder signs off on the check, or the lienholder agrees to allow the car to go unrepaired. … yeah, that was the short version!
The OP situation is called a “cash settlement” and is completely above-board. In the event of a total loss later on, the OP will be paid the market value of his car and the prior damage will be taken into consideration. Basically, “what could he have sold the car for before the total loss accident happened?” The extent of any prior damage deductions will depend on things like the age of the car, expected condition of an “average” car of the same year/make/model, etc. For instance, hail damage on a new car is going to be looked at a lot more seriously than hail damage to a 15 year old car because, let’s face it, who buys a 15 year old car because they want to look good rolling down the road? It’s a grocery getter, and hail isn’t going to impact its value as such in any significant way.
There’s nothing wrong with a cash settlement. In fact, if you cash settle, take your car to a shop and get going on repairs, and the shop identifies additional damage related to the accident but that was not on the original estimate, your claim can be re-opened and additional monies issued for the new damage. After all, the insurer can only estimate the damage that can be seen, right?