What is a salvage title?

Salvage cars might seem a great deal, with prices too good to be true. But there are things you should know before buying one. Clement Pre-Owned experts delve into why a car could receive a salvage title, the advantages and disadvantages of buying one, and the challenges you may face as the new owner.

A salvage-title vehicle is a car that has sustained significant damage in the past, a type of  branded title. The insurance company determines that a vehicle is regarded as a total loss when the repair costs exceed a certain percentage of its value, typically ranging from 60% to 100%. In such cases, insurers may sell the car to an auction, repair shop, or parts dismantler. If someone intends to repair and sell or utilize it for parts, they must obtain a salvage or "junk" title. If they opt for repair, they must complete the repairs, pass a safety inspection, and then the state's motor vehicle agency will issue a rebuilt salvage title. 

There are different reasons a car might get a salvage title.

• Flood Damage: In some states, flood damage is explicitly stated on the title, while others simply list the vehicle as "salvage." Consumer Reports and Carfax have identified a list of top 10 states known for selling the most flood-damaged cars. The top three offenders include Texas, Florida, and Kentucky. Although Missouri isn't on the list, conducting a thorough background check on used vehicles of your interest is still advisable.
• Hail Damage: If a car is caught in a hailstorm, the insurance company might classify it as having a salvage title due to hail damage. Certain states include a distinct "hail" designation on salvage titles to distinguish them from ones marked due to accidents or flooding.
• Theft Recovery: When a vehicle is stolen, the owner reports it to their insurance company and law enforcement. If the vehicle isn't recovered within a timeframe specified by the auto insurance company, they will promptly issue payment to the owner. Depending on the insurance company's policy regarding stolen vehicles, the title may remain clean or receive the salvage mark.
• Vandalism: Severe damage from vandalism may result in a salvage title, though it's not explicitly mentioned on the title in any of the US states. 
• Non-Repairable: A vehicle that's extensively damaged, inoperable, and has no resale value beyond its parts can receive a "non-repairable" designation, sometimes referred to as a "junk title" in certain states. In such extreme scenarios, the state prohibits repairing the vehicle, necessitating its sale to a scrapyard or destruction. 

The main advantage of purchasing a salvage title car is its lower cost. Such autos are selling for 20% to 40% less than clean-title vehicles. Salvage cars can be also beneficial for learning auto repairs.

Another scenario where salvage title cars can be advantageous is when they have specific types of damage. For example, if a vehicle was caught in a hailstorm while at the dealership and was deemed a total loss, even though it had no damage beneath the hood or inside the cabin, it could offer a significant cost-saving opportunity if you're willing to overlook the dings on the body and potentially have them repaired.

Similarly, consider a situation where a vehicle was stolen, reported to the police, and recovered within 24 hours before any parts were stripped. Even though the state may issue a salvage title because of the theft, the car might still be a worthwhile purchase since it incurred no damage during the incident.

However, outside these unique circumstances, it's ‌recommended to explore other used cars with clean titles to minimize potential risks. 

Below are some reasons why many people avoid buying salvage title vehicles.

Financing challenges: Banks are hesitant to finance salvage cars as their pricing may be tricky. Personal loans for these vehicles often carry significantly higher interest rates compared to traditional auto loans.

Read more about financing a used car.

Limited insurance coverage: Insurance companies offer minimal coverage for salvage title cars due to their low value, leading to higher premiums and lower payouts in accidents.

They may lack safety features, like airbags, considered standard by insurers, making them riskier to insure.

Uncertain vehicle history: Such cars may have an unknown history, including missed maintenance or hidden previous accidents, posing safety risks for you and your passengers.

Resale difficulties: Salvage title cars have low resale value,  and it can be challenging to sell or trade in such autos because of perceived risks and reduced value. Concerns about safety and reliability may also make private buyers hesitant to purchase these cars.

Safety concerns: While many branded title cars are safe, improper repairs or rebuilding without professional inspection may result in safety concerns, like defective airbags.

Future repair costs: Such vehicles may require more repairs over time, leading to additional expenses and potential issues like misaligned parts or shifting components.

If, despite all the risks, you're still considering buying a salvage title car, these tips can help ensure you make a more informed decision.

Understand title washing

Be cautious of "title washing," where sellers hide a vehicle's damage or accurate title status to boost its value. Obtain an official car history report from  Carfax and the NMVTIS to recognize the vehicle's background. 

Consult a mechanic

Take the car to a trusted mechanic who can spot signs of a salvage title vehicle, such as non-factory parts, paint discrepancies, misalignments, and t issues. Even if you're aware of the title status, a mechanic's inspection can reveal potential safety concerns and future repair needs.

Request original repair estimate

Ask the seller for the original repair documents to identify any potential problems that may need attention down the road. A car that received a salvage title several years ago but has been consistently driven since then is typically a safer bet than one that incurred damage more recently.

Check insurance feasibility

Before finalizing your purchase decision, reach out to your auto insurance provider. Request an insurance quote to confirm both the affordability and the legality of driving the vehicle, ensuring a secure and legally compliant ownership experience.

While acquiring insurance for a salvage car is feasible, it usually only covers liability. Collision or comprehensive coverage may not be accessible, and your liability coverage premiums may be higher than that of a vehicle with a clean title. Be prepared for inspections and appraisals as part of the process before obtaining coverage.

If you unintentionally purchase a car with a salvage title and wish to cancel the deal, here are the steps you should take:

Seek Legal Assistance Immediately

Find a lawyer experienced in handling car title issues to provide legal advice and aid in the litigation process. Time is critical, so do not delay in seeking legal representation once you discover the vehicle has a salvage title, as any delay could be used against you in legal proceedings. You can also reach out to the National Association of Consumer Advocates (NACA) for a list of attorneys in your state.

Contact Your State's Consumer Protection Office

Every state has a consumer protection office dedicated to safeguarding consumer rights and assisting in case of violations. 

Document Your Case

You can build a case of fraudulent selling by utilizing your buyer's guide. Under the United States Federal Trade Commission laws, all used-car dealers must provide a buyer's guides, containing warranty information in case of disputes between sellers and buyers.

Typically, such cases are straightforward, and a competent lawyer should secure a refund promptly. To avoid the risks of misinformation and dishonest dealings, we recommend purchasing cars from trustworthy dealers.

While salvage title cars may offer initial cost savings, the potential uncertainties, and limited benefits make them a risky investment. At Clement Pre-Owned, we prioritize your satisfaction, safety, and long-term value. Our cars undergo rigorous inspections, and we don't purchase or trade-in vehicles with title issues like salvage. Explore our wide selection of reliable, quality vehicles backed by our warranties and commitment to excellence.