Sue the owner for the difference.

Is your car new or used?

It doesn't really matter what you PAID ; but the actual value of the car ...

You need to go to a bank / Finance Company and have them give you a letter stating what the actual value of your vehicle was when it was crashed ....

The insurance company would have to honor that ... +5

well in the US you would have to drop your pants, bend over the fender and grit your teeth
In the US insurance companies go by 80% of book value
www.kbb.com
to total it, meaning it cost too much to be fixed and suing the at fault driver for the difference will get you no where.
Who's insurance company is offering the money?
did you have comprehensive coverage? (replacement)
judging from your question stating that it is too expensive to fix, if you take the money the insurance company will own the car.
Fixing even with your own funds wouldn't be an option

If it was their fault sue them for the amount you paid.

I would call them and discuss it. They may have a good reason, however, they should be liable for the value at the time of the accident plus sales and use taxes you paid and will not be reimbursed.
I found them to be a bit cheap (try to get by the cheapest possible) but usually fair.

In the U.S., we could take them to small claims court without an attorney. Attorney fees could quickly eat up part or all of that $3,000!

I can't add much to this but I wanted to let you know I am sorry this happened to you. Whose insurance company are you referring to, the person who did the damage or your own. You must have a deductible, was it in a parking lot and can the parking lot be held liable if you can't find who did it? There is something we call the "blue book value". That is a standard price which every automobile is valued at. Try and find if you have the same kind of thing in Australia. If you do they can't give you less than the blue book value for the car. They can offer but you don't need to take it. I would like to know what the "or else" is. We will give you XXX dollars, or else. Here if you threaten to take it to court, they usually settle up quickly because a court case is much more expensive then a settlement. Hope this helps a little.

Take the money and request to keep the car. See if you can shop arround and see if you can get the car fixed with used parts for the amount you recieved.

id call sue and have her attorney friends take care of it