If you’re shopping for a car, SUV, or motorcycle, you probably visited various car lots, talked with dealers and even visited an auto auction. As many car shoppers know, vehicles sold at auction come in all shapes, sizes, and conditions. But the most attractive feature of cars sold at auctions is the price, especially the vehicles with salvage brand. You may be tempted to buy such a car. But not knowing what a salvage title is may be holding you back. So what is a salvage car and what are the pros and cons of buying one?
What is a Salvage Title?
So, what does a salvage title actually mean? In simple terms, a salvage title is issued for a vehicle that has sustained damage and the insurance company assesses that it is better to pay off the previous owner rather than cover the repair cost. The criteria an insurance company uses to deem a car a total loss vary from one state to another.
On average, if a car has sustained damage and the cost of repairs are 70 percent of the vehicle’s cost at the time of the incident, the car is declared a total loss and a claim is paid on it. However, this is an average threshold. In some states, it can be as low as 50 percent, like in Iowa, or even as high as 100 percent in states like Texas. In Michigan, for example, the car gets a salvage title if the damage extent ranges between 75 and 90 percent.
But if the damage is assessed to be 91 percent of the pre-incident vehicle value, those are total vehicles and are given a scrap title or what some states call junk titles.
How Does a Vehicle Get a Salvage Title?
The reasons for a car to be given a salvage title car vary. It could have had an accident, flooding damage or other adverse weather conditions like hail. In some states, if a car gets stolen and is not recovered by the police within a certain period of time, that car is written off and the insurance company pays a claim on it. You may also find that cars that have been written on with spray paint or have broken windows and whose bodywork was damaged in an act of vandalism are written off and become salvage vehicles.
But, as you can assume from the thresholds and the damage extent, even if some cars are given a salvage title this does not mean they are beyond repair. Legally, you can’t drive a car with a salvage title on the road unless it goes through a recertification process and an inspection, which we will talk about later. But this does, however, mean that you can buy and drive a car with a salvage title but there are things to look for and a process to go through before this is legally possible.
Buying Cars With Salvage Titles
Some estimates say that a car with a salvage title can be up to 75 percent cheaper than its equivalent used car with a clean title. This is great if you’re looking for a lower initial payment, not worrying about taking out an auto loan, or taking out private party finance with a lender, or even using up your credit card allowance. This is particularly good for people with a low credit score.
There are a lot of factors that determine car value and whether this price difference is actually worth it. You need to consider that the car needs repairs and recertification before going back on the road. So it is important that you factor in those costs into your calculations.
Where to Find Them
You will not be able to buy a car with a salvage title at your local used car dealership. Salvage vehicles are usually auctioned off. Insurance companies put these salvage vehicles on auction in order to recover as much cash as they can from these vehicles. With the different thresholds for a vehicle to be issued a salvage title, the cars put up on auction are in all sorts of conditions.
Some will need a lot less money and effort to be fixed while others will take time, labor and purchasing of spare parts. Some cars end up being in perfect condition with either no or minimal damage. If you plan on selling your car, make sure you factor in the cost of repairs into the budget as it will help you determine the resale value of the car.
Do Your Research
When you go shopping for a salvage car at an auction, you need to be prepared. Research plays a huge role when it comes to buying salvage vehicles. There are resources you can use to check for vehicle history. However, this might not show you the full condition of the car. Physical blemishes, dings, and dents are easy to spot, and often easy to fix. But if a car has sustained flood damage, you might not notice anything wrong.
It might have been cleaned to the point where you don’t see any mold or anything wrong with the car. The issue can grow even further if you can’t start the car at the auction place. Flooded vehicles often have issues with electrical installations. For example, the electronic gadgets can be out of sorts, but if you can’t test them you wouldn’t know. If you can’t assess the condition of the car yourself, it is advisable to bring someone with you, a mechanic or anyone who knows their way around cars who can have the car inspected and help you spot the potential problems. An original repair estimate from the insurance company may even be possible to obtain.
Additionally, auctions are an overwhelming experience especially for someone who is a first-time visitor/buyer. The crowd noise, the speakers screaming numbers and registering bids, cars being moved around, this can all be a bit too much for a newcomer. In these cases, online shopping could be a better option. Not only are you able to avoid all the commotion, but there are also certain advantages you can take advantage of.
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If you know what car you are looking for, here are a few tips for buying salvage vehicles. First, compare the prices of your desired vehicle online. There are plenty of resources for that like the Kelley Blue Book or Cargurus. Subtract about 50-75 percent off that value and this is your targeted budget.
The Advantages of Buying Online
Your next step is to find a reputable website. For example, Auto Auction Mall has a huge database of salvage vehicles listed for auction. The advantages of these websites are significant. You are assigned an agent with knowledge of the market. You get to browse auction inventories more easily. And you can tailor the search to include only the salvage vehicles with options and the safety standards you require. You can go through all the available details included in the listing and look at the photos of the car.
You will be assisted with the bidding, the purchase and the delivery of the car to your driveway. This all makes the car buying a more appealing experience compared to physically attending an auction. There are also additional resources available at your fingertips when you are browsing online. Kelley Blue Book is certainly a great resource, but there are similar sites that you can consult as well.
Each car listed for auction will have the VIN number included that you can use to search for a car’s full history. This can tell you what sort of life the car has had previously, whether it was serviced regularly and you can find patterns of repairs and spare parts that have failed more often throughout the car’s life. But your ‘struggle’ with a car that has a salvage title starts only after you have it delivered to your driveway because this is where the recertification process starts.
Repairing a Salvage Car
A car with a salvage title can’t be driven on the road legally unless it is repaired and recertified. The process starts with the repairs. Depending on the state, you can repair the vehicle yourself or you may need to hire a certified mechanic from a body shop. Repairing a salvage car is a meticulous process. Take as many photos as possible of the repair process. File, and catalog all the spare parts information. Keep all the receipts from the spare parts you have purchased to use during the repair process.
Getting a Salvage Rebuilt Title
Once the repairs are completed, all states require you to go through the Department of Motor Vehicles and fill out certain forms. For example, in the state of Georgia, you have to use a licensed rebuilder for the repair process. But before the car is painted, you have to have the car inspected. This can be done either by private inspectors certified by the state or in certification stations. You have to tow the car to the inspection station. Some private inspectors will come and complete the inspection at your place. Important: Each State’s DMV has different rules when it comes to rebuilding cars. Make sure you follow the correct guidelines by choosing your State in our list of Rebuilt Title Rules Guides.
Documents and Photographs
E.g. in Georgia, a certified rebuilder will file a request for an inspection of a rebuilt motor vehicle. If you are living in a state where you are allowed to complete the repairs yourself, you will be required to file the equivalent of Georgia’s form T-22R yourself. Additionally, you will have to submit all the required documents signed by you. These usually include a Tag/Title application, and labor and parts certification as well as the original salvage title. The requirements vary from state to state, but these are the general documents you have to submit signed. In addition, provide all the photographs and the spare part receipts to the inspector. You will need to have the original repair receipts.
The inspector will look for names and stock numbers of the parts, the names of the buyer and seller of the parts as well as the vehicle identification number (VIN) of the car that the part was initially installed in. This is a step required to prevent the use of stolen parts during the repair. This is also why you have to look into the vehicle history report and the current title when purchasing a car.
Even if you are buying a car from the used car dealer, check the vehicle history reports to make sure there is no title washing going on. This happens when a salvage vehicle is brought into another state that doesn’t recognize the salvage brand. The car is issued a new title which may conceal its salvage status. This illegal move can up its resale value significantly.
Fees and Insurance
If you have the car inspected by a private inspector, you will have to pay an inspector’s fee.
Once you have passed the inspection, you can go and submit all the documentation and materials to your local Department of Motor Vehicles (DMV) as well as the inspector’s report. You will also have to pay a state fee and a title fee. To avoid the private inspector’s fee, you can use the state inspection station.
However, the waiting time might be a lot longer, weeks longer at times. Insurance can be another issue when it comes to dealing with rebuilt salvage titles. Insurance companies are reluctant to provide liability insurance, not to mention comprehensive insurance coverage on cars that have previously been written off. The argument is that they have no way of knowing that, in case you file a claim with a rebuilt salvage title, the damage sustained is new and not the damage that got the car a salvage brand in the first place.
However, there are ways of working with insurance companies. This is where all the certification, inspection and documentation can come in handy. Some cars insurance companies may outright refuse to deal with you, while others might give you a quote. The downside is that the premium will be higher than usual.
The next step is to compare quotes from different cars insurance companies. You can then use your paperwork to show that the car has passed a state inspection.
In addition, some cars insurance companies will have your car inspected by a hired certified inspector. You might get a quote that will not leave you feeling like you have been ripped off. This is where the recertification process ends. You can either keep the car or sell the car on if you see a profit in the deal.
Salvage Title Considerations
You can take out several key points from this article. Salvage vehicles have sustained damage that causes the cars insurance companies to write them off. Some might have been stolen and recovered after the insurance company has paid the claim. A number of these cars are in mint condition or minimal damage with minimal cost of repair. One of these could be a perfect car to save some cash.
Salvage title vehicles, for those who know their way around cars, are a good way of getting a cheap car.
You can then fix the car and use it as a daily driver. Alternatively, you can sell the car on for a profit with fair market value. It’s a good deal if the re-titling and repair costs stay below the price of an equivalent clean title vehicle. Make sure you know what you are buying. This should minimize the chance for disappointment, and maximize your savings. Salvage title cars can be a great way to purchase used cars cheaper than you would pay at a dealership.