Financial experts often tell novice car buyers to never buy a car with a salvage title. But what’s so bad about these vehicles? Are salvage titles bad?
The truth is that a salvage car is simply one that has been declared a totale loss by an insurance company. This occurs for a wide variety of reasons, not all of which render a car unsafe to drive or unwise to purchase. There are, however, a number of drawbacks to purchasing such a vehicle. Even if you are able to save money and are confident that you know what you’re getting yourself into, the following are reasons to proceed with caution when you buying a car with a salvage title.
Difficulties With Financing
Popular question “Is buying a salvage car bad?” contain some part of truth. Cars with salvage titles decline in value more rapidly than other cars, and their resale value is very low, particularly if the original damage is not fixed. For this reason, most lenders will not finance a salvage vehicle. That means you’ll need to pay out of pocket for such a car. Normally this is a good thing, because it means you won’t have to go into debt on a purchase. But chasing good money after a bad car could be a bad investment, so proceed with caution before spending your hard-earned cash on a salvage title car.
Not all insurance companies will willingly insure salvage title cars. Even when they do, they may do so only with many exceptions, or at higher insurance premiums. Make sure your insurer is willing to cover the salvage vehicle. Get a clear and specific quote about insurance premiums, as well as what is and is not covered. If the cost of insuring the car is greater than the difference in price between the salvage car and other vehicles, it’s probably time to consider a different approach to car buying.
Without a vehicle history report, there’s no way to know with absolute certainty why the car was salvaged. You should never rely on the word of a seller alone, since salvage title car scams are plentiful. Instead, seek a car report to assess the car’s overall reliability. Sometimes, a salvage vehicle only has cosmetic damage. In other cases, the damage is invisible but extensive, rendering the car unreliable, and potentially even unsafe for you to drive.
Price for buying a salvage title car typically start at about 5% below market value, with the price plummeting from there depending on vehicle history, age, repair work, and other factors. If you are planning to repair and resale a salvage vehicle, you might be able to earn a profit as long as the investment you put into the vehicle is less than the amount you earn from the sale.
If, however, you plan to drive a salvage vehicle for a few months or years and then sell it, you might want to reconsider. Salvage vehicles go down in value more rapidly than other cars. A salvage vehicle resold after several years of use will have a very low value, making it an unsavvy investment, particularly compared to fixing up a car that’s not a salvage title.
Salvage Title Scams
Salvage title scams are abundant. Scammers know that people often do less research into salvage vehicles, and they take advantage of this. From title washing scams that obscure the fact that a car is a salvage title to illegal activities such as rolling back the odometer or selling stolen vehicles as salvage cars, you’ll need to be careful to avoid salvage scams.
The single best strategy for doing this is purchasing your own car history report based on the car’s VIN. Without this, you’re relying solely on the word of the seller, and that’s a really terrible idea.
Doing Your Homework
It’s possible to get a great deal on a salvage car at a dealer auction. You might even be able to turn a salvage vehicle into a reliable car you can safely drive, particularly with the assistance of a skilled mechanic. But this strategy requires you to do your homework. From properly insuring the car to looking into its history and properly repairing damage, you will need to spend more time on a salvage car than a traditional used car if you want to get the most bang for your buck. Not all purchasers have the time, energy, or inclination to do this research and legwork, so be honest with yourself about how much work you are willing to invest in the vehicle.
Restoring the Car
If you want to make the car drivable and sellable, restoring it is your only option. It’s not enough to just fix the car up, though. You’ll need to address any underlying structural or engine problems. Every state establishes its own laws for restoring salvage cars. Only some allow title refurbishment, so you’ll need to carefully research state laws before restoring a salvage car. You might be required to follow a very specific protocol. In some cases, even cosmetic damage will render the car incapable of being restored.
For someone who plans to buy a large number of salvage vehicles, this may be worth the effort, since they’ll have the time, energy, and funds to pay a lawyer and do their research. But if you’re just hoping for a cheap car, or to make a quick buck, a salvage vehicle is more likely to be a source of frustration than it is to bring you quick riches.