What is a Salvage Title and How to Avoid Buying a Salvage Title Car?

  • by: Sibora
October 25, 2021

Salvage Title: What is it and How to Avoid Buying a Car with a Salvage Title?

Buying a used car can save you a ton of money, but when shopping for one, you must be careful of salvage title vehicles and not get tricked into purchasing one.

What is a Salvage Title?

What is a Salvage Title Vehicle?

A salvage title is a type of vehicle title branding that marks the car or truck as having been significantly damaged, and an insurance company has deemed it a total loss and paid a claim on it. Salvage title laws in the U.S. vary widely from state to state, and each area sets its own criteria for what constitutes a salvage title.

Some of the ways a car or truck becomes a salvage vehicle are through?

  • Flood damage.
  • Theft (stolen vehicles).
  • Hail damage from hail storms.
  • Odometer rollback.

In most cases, the salvage title vehicle experienced a severe car crash that damaged it beyond repair. Some law enforcement vehicles and heavily used taxis also become salvage title vehicles due to significant damage over time through use.

Once the insurance company declares the vehicle a total loss and pays the claim, the Department of Motor Vehicles (DMV) or another similar agency within the state issues the car a branded title that says “salvage title” on it. When the DMV issues a salvage certificate, the vehicle cannot be legally registered, driven on public roads, or sold. Typically, the car will be taken to a junk or salvage yard and used for parts.

Why Should You Avoid Salvage Cars?

Although salvage cars may cost way below the fair market value of a similar make, model, and year, they also come with some serious risks. The first is that the car may not be safe to drive. Therefore, unless you have significant experience working on and repairing vehicles, you should seriously consider passing on a salvage title car.

If you cannot afford to buy the car outright, you may have difficulty getting a loan to buy it. This is because banks and other lenders don’t like taking a risk on something they cannot guarantee they will get their money back on. However, it depends on the type of damage the car incurred. For example, if a vehicle was deemed a total loss because of hail damage (which is often cosmetic only), then you might get lucky with financing.

Many insurers won’t even consider insuring a salvage title vehicle, so you might not be able to get it insured, and most states require insurance to drive legally on the roads. If a car insurance company does agree to insure the vehicle after it is rebuilt, they will probably charge you a higher rate for the same insurance coverage.

Another big reason to shy away from a salvage car is resale value. Most auto dealerships will not take a salvaged vehicle as a trade-in, and if you try to sell it privately, you might have a hard time finding a buyer. In the end, the vehicle will not be worth much, and you might have sunk a lot of time and money into something that has retained little to no value.

How Much Does a Salvage Title Reduce the Value of the Vehicle?

Unfortunately, a salvage title affects the value of a vehicle significantly. According to Kelley Blue Book, a salvage title car is worth approximately 20-40% less than a clean title vehicle.

However, each branded title car is different, and you should always have a mechanic appraise it, taking into account the type of damage that affected the title.

Does a Salvage Title Affect Insurance?

Yes. Once the auto insurance company declares the damaged vehicle a total loss, pays the claim, and the DMV issues the car or truck a salvage title, it cannot legally be driven on the roads. Therefore, you cannot insure it either.

However, if you or a trained mechanic repairs the vehicle and has it inspected by the state, you can apply for a “rebuilt” title, and then you can get it insured. However, the qualifications to do so are stringent, and the repairs need to be professionally completed by a body shop or mechanic.

Does a Salvage Title Affect Insurance?

Can a Salvage Title Car Be Insured?

No, not until it is rebuilt. Once it is rebuilt, some insurers will sell you full coverage insurance to cover anything that occurs because it may be impossible to assess all damage to the vehicle.

Can You Get a Salvage Title Cleared?

Unfortunately, you cannot clear a branded title. If you have a car with a salvage title, your only option is to use it for parts, sell it to a junkyard, or rebuild the vehicle and refurbish it back to life. Once you do that, you will need to go through a process with your state DMV (or another similar agency) to have it thoroughly inspected. Once they approve the repairs, they may agree to rebrand it as a rebuilt title, but it will never be cleared or restored to a clean title.

Because salvage laws vary so much, sometimes criminals will fix up a vehicle and then move it across state lines and register it as a clean title. This illegal process is called “title washing.”

How to Restore a Salvage Title

Once you have a professional mechanic, completely restore the vehicle back to safe and working condition. You must have it assessed by the state. You will need to provide photos of the car (before and after repairs), along with the original repair estimate and all invoices for the cost of repairs or parts purchased. You may need to pay a fee to apply for a rebuilt title. Once the state approves your title application, you can then register, drive, and ensure the vehicle. You can also sell it but keep in mind any branded title car; even a rebuilt one will have a lower resale value than a new title or undamaged used car.

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The choice to purchase a salvage title car is yours. However, armed with the information above, you may find that it makes sense to keep shopping and find a vehicle with a clean title history instead. Of course, you can always check a VIN to get a vehicle history report online using the AutoDetective tool to find out if a vehicle has a branded title or was in any accidents.