Should You Buy a Car with a Salvage Title?

Published on: May 22, 2024

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 indicates the vehicle has little financial value in its present state. It's issued when the vehicle is damaged and deemed a total loss by an insurance company.
Most people should steer clear of salvage-title vehicles. However, mechanics, those with extensive knowledge/experience working with cars, individuals who don't plan to resell, and people who can afford to pay cash may benefit from them.
Vehicles with salvage titles present a few risks, including potential fraud, safety concerns, reselling difficulties, and hardships finding insurance or finance, but they also have key benefits, like saving money and being a parts source.

What Is a Salvage Title?

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.

Why Is a Car Deemed 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:

Floods
Fires
Hail or windstorms
Theft and vandalism
Stolen parts
Riots
Remanufactured/rebuilt and sold
Returned under warranty
Previous use as a taxi/law enforcement vehicle

Should I Buy a Car with a Salvage Title?

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?

Risks of Purchasing a Car with a Salvage History

There are risks associated with buying any used car. However, those with salvage histories present unique threats that shouldn't go unmentioned.

Safety Concerns

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.

Potential Fraud

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.

Difficult to Insure or Finance

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.

Tricky To Resell or Trade

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.

Safety concerns for a car with a salvage title

Reasons To Buy a Car with a Salvage Title

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.

Save Money

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.

Find an Otherwise-Forgotten Diamond

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.

A Parts Source

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.

Who Should Buy a Salvage-Title Car?

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:

You are a mechanic.
You have ample knowledge and experience working on cars.
The vehicle was stolen and recovered after being declared a total loss, but it didn't sustain any damage.
You know the seller and have access to the vehicle's entire history.
You don't plan to resell the vehicle.
You can afford to pay for the car in cash.
The vehicle sustained hail damage but didn't have any mechanical or structural deficiencies.

How to Buy a Car with Salvage History

If you decide to purchase a vehicle with a salvage title, you should follow these nine steps to minimize the risks:

Understand you're buying for life. Since reselling salvage-title vehicles can be extremely challenging, you should prepare to drive your purchase until it completely dies.
Know local laws. Inspection criteria and damage thresholds vary from state to state. Research your state's laws to understand what you're getting into when buying a salvage car.
Find a reputable seller. You shouldn't purchase vehicles through Craigslist or similar websites. Instead, find reputable repair companies and independent dealers, checking online reviews as you go to confirm the sellers have a good track record and fair prices.
Look up the VIN. Use the National Motor Vehicle Title Information System, a federal database created to reduce title fraud, to look up the car's vehicle identification number.
Get a full inspection. Privately hire a mechanic to conduct a complete inspection of any salvage-title car you're interested in. They're trained to spot red flags and less-than-professional repairs that may be a detriment to your safety.
Know the signs of fraud. Regardless of how reputable the seller is, never let your guard down. For instance, if the car has recently received a title from a different state, then the seller may have "title washed." This is a scam wherein people register the damaged vehicle in a state with looser rebuilt title standards. Additionally, take note of any attempts to downplay damage.
Check when the salvage was issued. You're more likely to get a good deal from a car that was given a salvage title years ago but has been dependable recently than from a vehicle that received the title a week ago.
Confirm the vehicle's history. Use websites like Carfax and Autocheck to acquire information about the vehicle's history, such as mileage, number of owners, and accidents.

Salvage Title Inspection Strategies

When inspecting the car, follow these two tips to conduct an accurate evaluation:

Test drive it. See a button, push the button. Make sure the wheel tracking is straight. Hit the brakes hard (when it's safe to do so). Try absolutely everything in the vehicle, including how it handles, before parting with your hard-earned cash.
Learn as much as possible about the damage. Request repair records and estimates from the seller. If you can, speak to the person who repaired it, too. Ask for photos of the vehicle depicting the pre-repair damage or try to find them online.

Salvage title pros and cons

Tips for Insuring a Rebuilt Salvage-Title Vehicle

As established, acquiring insurance for a rebuilt salvage-title car is difficult. However, these tips may make the ordeal easier:

Shop around. If you want full coverage insurance, you will need to speak to multiple providers and offer information about the car's history to find out whether they'll offer insurance.
Prepare yourself for higher rates. Some insurers charge more for rebuilt title vehicles. This can be up to 20%.
Reduce your coverage. In most cases, you'll get a better deal opting for liability coverage over full coverage due to the lower potential payout for damage.

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.