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How Does a Car Gain a Salvage Title, and is It Possible to Fix the Car So the Title is Clean Again?

Date: 04/10/2017 |Category: Buyer Tips, Salvage Cars

It’s easy to get excited when you see an amazing deal on a car you’ve always wanted on an auction site—until, of course, you see that the vehicle has a salvage title. If you know anything about cars, you probably know that a lot of experts advise against buying cars with salvage titles. You might be quick to click past a salvage car or to ignore salve vehicles when you filter online searches.

Not so fast. A salvage car can indeed be a savvy financial decision—but only if you know what you’re getting into, and how to keep the deal profitable.

How Does a Car Get a Salvage Title?

Cars with a salvage title have been salvaged—declared a total loss, or “totaled”–by an insurance company. Totaled vehicles are simply those that the insurer has decided not to repair after they are damaged. In most cases, this is a purely financial consideration, with insurers weighing the potential costs of restoration against the cost of the vehicle itself. Thus low-value cars with extensive damage are more likely to be salvaged and end up in salvage lots and auction sites than other cars.

In some cases, however, state law requires an insurer to salvage a car. Cars may be declared a total loss if they are flooded, suffer significant hail damage or face damage to the frame of the vehicle that renders it unsafe to drive or impossible to repair. These are the salvage cars buyers should watch for, since they can never really be restored to their original condition, and may not even be safe to drive.

Common Causes of Salvage Titles

Salvage vehicles can be totaled for a wide variety of reasons, and knowing that a car has a salvage title alone tells you very little about its condition, driveability, or when you should purchase it. Some of the most common reasons vehicles are salvaged include:

  • The car is old or of very low value, and experiences damage in a car accident.
  • The car is new and of high value, but suffers extensive damage that is greater than or equal to the value of the car.
  • The car has been damaged in a hail storm.
  • The car has been flooded.
  • The engine has been damaged in a car accident, or due to sabotage such as the gas tank being filled with sugar.

Knowing why the vehicle has been salvaged can help you determine whether you should buy it, whether you will be able to resell it, and whether it has any value at all. Note that some unscrupulous sellers attempt to obscure the reason for which a vehicle was salvaged, so due diligence and a willingness to do your research are both vital if you want to win at the salvage car game.

When to Buy, When to Pass

Whether you should purchase a salvage vehicle is a personal decision dependent on your ability to pay for the car, to repair it, and to find a suitable buyer. However, some considerations can help you determine whether a salvage car is appropriate. A salvage car may be a good option if:

  • The car is inexpensive, and you can pay in cash.
  • The cost to repair the car is minimal.
  • The damage to the car is purely cosmetic, and renders it neither unsafe to drive nor cosmetically irreparable.
  • You can work with a mechanic or body expert you trust.

You should not buy a salvage vehicle if:

  • You cannot pay for the car in cash.
  • The car has severe structural problems that will be costly to fix.
  • You cannot get a vehicle history report; without such a report, you cannot rely on the seller’s word alone about why the car is a salvage vehicle.
  • You need to recover a very specific amount from the sale; selling and reselling of salvage vehicles is inherently unpredictable.

Financial Considerations for Purchasing a Salvage Vehicle

Purchasing a salvage vehicle is a bit different from purchasing a more traditional car. For one thing, most lenders will not finance a salvage vehicle. The reason for this is fairly simple: the value of a salvage vehicle is unpredictable, and its status as a salvage car drives down its potential resale value. Because salvage cars often suffer mechanical issues, it’s also possible that the car will die before the loan is paid off.

For this reason, and because buying a salvage car with a loan is a bad investment, you should be prepared to pay for the car in cash, out of your own pocket.

Before purchasing a salvage car, you’ll want to ensure you are able to insure the vehicle. Not all insurers will insure salvage title cars, so if you plan to drive the vehicle, you must work out insurance arrangements in advance.

Can a Title Be Repaired?

Repairing a salvage title is no simple matter. Once a salvage car is a salvage car, it must always have a salvage title. So-called title washing, the process of registering a car in a new state in an attempt to obscure its status as a salvage vehicle, is illegal and can subject you to both civil and criminal penalties.

In some states, it’s possible to repair damage to a car and register it as a refurbished title. In this case, a buyer will still be able to see that the car was a salvage vehicle, but the restored title denotes a car that has been substantially repaired.

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