Having saved for months in order to buy car, you now have enough to step into your local used car dealership or used vehicle auction and get a nice used car. Before stepping out the door, you decide to conduct a little online research.
Sitting in front of your PC or laptop, you begin by launching your favorite browser and using Google to search. From the list of search results, you select the top 5 used car auction links and open each in a new tab.
After browsing through the available inventories, you finally have the perfect wheels. But wait. In the vehicle’s description there is an asterisk with the following words: salvage title.
Before rushing into the purchase, it is important to understand what you are getting into.
What is a salvage title?
This is a motor vehicle title given to a car or truck that may have been badly damaged, either from an accident or as a result of bad weather. The insurance company has determined that the cost of repairs is more than 75% of the vehicle’s value.
According to Consumer Reports, salvage titled vehicles are those which are worth less than 50% of their Kelly Blue Book value. It is important to understand that each state has a maximum threshold and different rules for salvage titled vehicles.
When a car has been involved in an accident or it’s weather-damaged, auto insurance companies declare such vehicles “total losses” and they usually auction them to rebuilders or salvage yards.
Any damage that costs a lot to repair will increase the likelihood of a total loss. Usually, this will include:
Structural damage – this is damage to the chassis or frame of the vehicle, which is typically difficult and expensive to repair.
If it’s sold to a rebuilder, the car or truck will be repaired and sold off to willing customers, but, by law, it will be branded as a salvage title. Buying such a vehicle can have a lot of benefits for first time vehicle owners, mechanics and vehicle enthusiasts.
It all comes down to math. Dealers that specialize in salvage vehicles buy them very cheaply at auction and fix them as inexpensively as they can, with the hope of reselling them for a discount off the retail price. For them to make a profit there has to be plenty of profit built in, which means that the totaled vehicles tend to be newer and have fewer miles.
Are salvage titles really worth it?
As a first time vehicle owner or a current vehicle owner looking for an affordable means of commuting to and from home and work, buying a salvage title vehicle can be a good investment. The purchase price will often be significantly less than retail.
As a result, your new car will benefit from low mileage and when it comes to reselling it, it will fetch a higher price. So, to answer the question above, salvage titled vehicles can be worth it, with some caveats.
Here are the benefits of buying a salvage title.
Own a car for a fraction of the retail value. The main goal of purchasing a salvage title is that you get to own a car for a fraction of the cost. Sometimes you can even buy newer cars under $5000.
Not only will you be able to commute from home to work much easier especially if your job calls for late shifts but you will get to save allowing you to offset bills.
Majority of salvage titled vehicles are offered for sale at used car auctions. Here, you will find auto insurance companies selling the vehicles to the highest bidders. As an aspiring vehicle owner, it is important to research before making your first purchase.
At the used car auction, start by assessing the type of damage on the car. Is it cosmetic or structural? Avoid vehicles that have been in a fire, electrical or flood damage. The reason you should avoid them is because the amount of money required to fully restore them back to their roadworthy status is high. Look for collision damaged vehicles instead.
After the car is repaired, you can apply to the state for an adjusted title
Wide range of vehicle selections
If you visit a vast majority of used car auctions, you will be surprised at the huge selection available. Not only will you find American brands like Ford and Chevrolet but you will find many of the foreign brands like Toyota, Honda and others.
With such a huge selection, you are bound to drive home with a decent salvage title (assuming it’s drivable, of course ;-)).
In order to navigate a used vehicle auction like a pro, you need to work with a third party dealer. For starters, they can help you get into exclusive auctions for dealers only. Secondly, you will have the chance of browsing the huge selection of vehicles before making your bid. Lastly, you will be given the opportunity to bid for the selected vehicle, thus driving home with a “great” vehicle.
Perfect for parts
It is important to understand that majority of bidders in a used car auction are not buying the vehicles to drive. Some are vehicle enthusiasts while others are mechanics. Vehicle enthusiasts are in search of classic models which they can restore and add them to their vehicle collection. They may also restore the vehicle and sell it at a high end auction.
Mechanics buy salvage titled vehicles exclusively for their parts. The parts can become handy especially when restoring vehicles where parts are hard to come by. For example, you have a customer who wants to restore a car built 30 or 50 years ago. Finding genuine parts for such a car is difficult.
Instead of having custom made parts fabricated by an independent dealer which is quite expensive, browsing the huge selection at a used car auction means the mechanic may just find what he or she needs.
How to identify a vehicle with a salvage title
Thanks to the internet, a vast majority of used car dealers have websites where they get to post their inventory. If the used car dealer is genuine, the details provided under the vehicle description will be genuine too. Other descriptions you will come across include former taxi, former police cruiser, a warranty return, re-manufactured vehicle or not built for USA.
To avoid being a victim of fraud and get to drive home with a roadworthy vehicle, here are steps to implement in order to identify salvaged titled vehicles.
Step One – Get the vehicle’s history report
Also known as a VIN check or used car report, this is a detailed document that highlights the history of the vehicle. To get started, head over to VINCHECKUP.com. The website above reports all accidents where an insurance claim has been made. Furthermore, it records the registration of a car by state and its title type.
In the report, you should find an indication that the car is salvage titled or not. Furthermore, more information will be made available as to why it was branded as such.
Step Two – Hire a professional mechanic
To have peace mind, it’s wise to hire an independent car mechanic who is skilled, experienced, certified and licensed. On the appointed day of buying a salvage titled vehicle, let the mechanic accompany you.
At the dealership, ask the car dealer to have the selected car inspected by your certified diagnostic mechanic.
You can negotiate with the used car dealership to make a refundable deposit just in case the car does not checkout.
Certified diagnostic mechanics have a keen eye and so they are able to spot carefully concealed structural damage. This is true for cars where different parts have been forged together. They can also help you identify flood damaged vehicles.
Step Three – Check with your local DMV
Each state has set different guidelines when it comes to salvage titles. Before buying the vehicle, make sure that you are in compliant with the laid down guidelines. You should also use the National Motor Vehicle Title Information System. As a federal database, it covers majority of the states. All you need is the VIN for the vehicle you are interested in and you are good to go.
Step Four – VERY IMPORTANT!
Check with your lender and insurance company.
If you require financing to purchase the vehicle, you’ll want to find out if your lender will provide financing for salvage title vehicles. Very few do, if any.
However, once it’s been rebuilt, vehicle financing becomes much easier.
Of course, if you’re buying for cash, you don’t have to worry about that, but you still have to consider the other end – when you go to sell it. The future buyer will run into the same problems in getting financing, which will limit your market to people who have the cash to buy it from you.
Another major consideration is insurance. You won’t be able to get insurance for a vehicle with a salvage title until the classification is changed from “salvage” to “rebuilt”.
Make sure you work out these issues before you buy a vehicle with a branded title first, or you could end up with an expensive, rebuilt driveway ornament.
Step Five – Inspection
After you’ve completed the necessary repairs, you can fill out some forms and pay some fees (of course) and get it inspected at the DMV. If it passes inspection, it will be rebranded as “rebuilt from salvage” or something similar (each state is different). This process will take part of the stigma away, but certainly not all.
When a vast majority of people come across the words “salvage title” in a vehicle’s description, they immediately assume that it’s not worth it. They assume that there was severe hidden damage because of the term “salvage”, and that conjures up images of junk yards.
There are times when the vehicle is not in a bad shape as you may think. Sometimes such vehicles have been totaled by auto insurance companies for other reasons.
For instance the owner of the vehicle negotiated with the auto insurance company to have the vehicle totaled. This decision arose because the auto insurance company does not want to pay off large claims. These claims may be associated with medical costs and others. By totaling the vehicle, the auto insurance company will be in a better position to settle.
In such a case, you may come across a great bargain which does not need huge repair costs.
So, before buying a salvaged titled vehicle, do your homework. You might get lucky and drive home with a great vehicle.
The biggest advantage to buying a salvage title vehicle is the price. You could potentially save thousands on your purchase.