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Are you considering a car with a salvage title? The enticing savings might catch your eye, but before you get too excited, there's more to the story. Beneath the surface, hidden damages could jeopardize both your safety and your wallet. To navigate this tricky terrain, it's crucial to grasp the implications of a salvage title on insurance, resale value, driving habits, and financing. Let's dive into what you need to know to make an informed decision.
To understand the status of the car you're interested in, you need to know the ins and outs of salvage titles and how they affect your insurance, ability to resell the vehicle later, driving habits, and financing options.
Key Takeaways
A salvage title shows the vehicle has little financial value in its current state. In other words, an insurance company has decided it isn't worth repairing and has condemned it as a total loss.
It depends on the insurance laws in your state. In Nevada, for instance, a vehicle is deemed a total loss if the damage surpasses 65% of the fair market value. However, damage must exceed 75% of the fair market value in New York and 80% in Oregon.
While said titles are typically granted after major damage caused by an auto accident, other events can trigger it, including:
Generally, no — these vehicles come with major risks (detailed in the next section) that shouldn't be ignored. However, purchasing a salvage-title car may make sense in some cases, provided you conduct a thorough deep dive into the vehicle's history to confirm whether it's a genuinely good deal.
Let's say you like a car with a clean history, two past owners, zero accidents, and up-to-date maintenance records. But following the second trade-in, a hailstorm occurred, and it was deemed a total loss, even though the interior and integral components weren't damaged. As long as you can live with the exterior damage, you've found a great money saver.
Alternatively, a vehicle was stolen, reported, and recovered before any parts were stripped. Even though the state may issue a salvage title due to the theft, it hadn't sustained any damage and may remain a worthy purchase.
As you can see, these relatively rare scenarios present excellent money-saving opportunities. Outside of these, finding used cars with clean titles helps avoid excessive risks.
Suggested Reading: Can you get a title loan using your registration?
There are risks associated with buying any used car. However, those with salvage histories present unique threats that shouldn't go unmentioned.
Safety is the number one risk. Yes, the car's exterior may look fine, but it's what's under the hood that counts. And if you aren't a mechanic or somebody with a lot of automotive experience, you may struggle to realize the true extent of the damage before parting with your cash.
Even salvage cars that have passed professional safety inspections aren't necessarily as safe as vehicles with clean titles. If the title was granted after a collision, the car's structural integrity may be compromised, failing to offer you the same protection in an accident. Today's cars have metal "skeletons" that bend to absorb impact which cannot be bent back into position and reused.
But collisions are just the tip of the iceberg. Flood damage, for instance, can cause mold, corrosion, and boundless electrical issues that may present extra hazards that adversely affect your safety.
Not every salvage-title vehicle is hopeless, but don't assume the seller is telling the truth. Anybody can say the damage was minor, but that doesn't make it the truth.
Sometimes, sellers will show you documentation that shows repairs were made. However, the validity of this is difficult to ascertain and if the vehicle turns out to be in less-than-ideal health, you have little (or no) recourse.
Generally, used cars are sold "as is," meaning you acknowledge that there may be known and unknown issues. While suing the seller is possible, you'd need to prove they misled you to win the case — an extremely difficult feat.
Insurers won't cover salvage-title cars because they can't be driven on the road. They'll offer them to those with rebuilt titles, but the process is difficult.
As previously mentioned, vehicles involved in a serious accident could have compromised structural integrity, possibly resulting in a higher claim down the line, regardless of the collision's severity. In this case, you may only be able to obtain liability insurance and other required coverages; comprehensive and collision insurance might not be a possibility. Some providers may refuse coverage altogether.
Likewise, salvage titles present unique risks to lenders. Even though the purchase price (and thus, your loan amount) is significantly lower than the fair market value, salvage-title vehicles are less likely to outlast the loan. Therefore, many lenders are reluctant to finance them. And if you find a lender who's willing to accept the car, you'll likely pay a higher rate or be forced to pay more upfront.
Since salvage-title cars have little to no value, you'll find reselling or trading them extremely difficult.
Dealerships are unlikely to accept vehicles with salvage titles due to the high risks and low value. A few used car sellers might take them for parts, but this process is unattractively convoluted.
Private sales can be just as challenging. These buyers tend to look for a car they can drive away in, and this kind of title can be a massive deterrent.
On top of that, cars with salvage titles can't be valued as accurately. Pricing guides like Kelley Blue Book or Edmunds can't account for the various damage types and severities. Thus, agreeing on a reasonable price can be burdensome.
Despite the risks, there are a few key benefits to buying a salvage title. Although, only a small percentage of car buyers can enjoy them all.
According to Kelley Blue Book, vehicles with salvage titles are marketed between 20% and 40% less than the same model with a clean title. So, you benefit from stellar savings you won't get elsewhere.
That said, every car's salvage history is different. Thus, you should always get a professional, private appraisal to determine the true market value, rather than explicitly trusting the seller.
Sometimes, a car with a salvage title will only be slightly damaged but retain its notoriously low price.
For instance, a hailstorm could damage the body but leave the inner workings entirely untouched. Similarly, older vehicles may have lost their market value to the point they've been declared a total loss. However, they may only require minor repairs. Likewise, cars recovered following theft may be given a salvage title without being in an accident.
You can find an incredible bargain if any of the above applies.
Salvage-title vehicles are a great source of parts. You can purchase them as "donor cars," allowing you to repair worthier vehicles cheaper.
If you enjoy repairing and tinkering with cars, you can purchase those with salvage titles to repair. However, you need to factor in the associated costs of obtaining a rebuilt title (like an inspection fee) if you plan to drive it.
As emphasized throughout, buying a car with a salvage title isn't for everyone. Most people, particularly those who require reliable transport every day, are best off avoiding these vehicles.
That said, you may be perfectly positioned to purchase a salvage-title car if you (or the vehicle) fit any of the following statements:
If you decide to purchase a vehicle with a salvage title, you should follow these nine steps to minimize the risks:
When inspecting the car, follow these two tips to conduct an accurate evaluation:
As established, acquiring insurance for a rebuilt salvage-title car is difficult. However, these tips may make the ordeal easier:
Purchasing a vehicle with a salvage title is inherently risky, but the upsides may outweigh the downsides if you're a mechanic or have an intimate understanding of cars and how to fix them.
You cannot get insurance on a car with a salvage title because it can't be driven on the road — the insurer will be the one to write it off in the first place. However, you can get insurance on cars with rebuilt titles, however, the process is trickier than for vehicles with clean titles. Typically, insurers give a liability policy for a rebuilt car, but won't relinquish a full-coverage policy that includes collision protection.
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