Close

Should You Buy a Car With a Salvage Title?

Stephen Fogel
February 4, 2019

Buying a car with a salvage title can be risky. If you do your research and understand exactly what you’re buying, you could get a great deal on a reliable used car. But if you’re not careful, you could be in for years of aggravation, breakdowns and major expenses. 

A vehicle’s title is the document that establishes the car’s ownership status and general condition. Most vehicles never suffer major trauma and possess a clean title. But others are not so lucky. They end up with salvage titles.

Typically, you should avoid buying a car with a salvage title — we'll go over all the problems they can come with. But, if you're willing to do a good deal of research and have it thoroughly checked out, you could get a good deal. Here's how salvage titles work.

What is a salvage title?

Cars can be involved in major accidents, storms, floods or fires, get damaged by hail, or get vandalized. Others are stolen and later recovered, after being stripped apart. In many of these situations, the cost of repairs is higher than the actual value of the vehicle. This usually leads the insurance company to declare such a vehicle totaled.

The owner is paid the current market value, and the insurer takes possession of the damaged car, which then gets a salvage title. This lets future buyers know that the vehicle has been seriously damaged. It’s then often sold to the highest bidder.

Some of these cars are sold for scrap, some have their usable parts removed for resale, and some are rebuilt into presentable used cars that get put back into the marketplace. For this last group, some will be perfectly usable — but others won’t. 

The laws regarding salvage titles vary by state. If you’re considering buying a car with a salvage title, it’s important to research and understand your state’s regulations. For instance, in some states you may find heavily used police cars and taxis, as well as lemon-law buybacks, being resold with salvage titles. These aren’t good options.

» MORE: Find a certified repair shop near you

Are any salvage cars worth buying?

Yes, but you have to be careful. Let’s look at the case of a five- to 10-year old car that, after years of depreciation, is worth less than half its original value. If this car is in a moderate accident and has several of its body parts damaged, it’ll be considered totaled.

A body shop can purchase this essentially sound car from the insurance company for a very low price, repair it for a reasonable amount, and resell it at an attractive price that will still make them a profit. 

In many states, these rebuilt cars with salvage titles have to pass a state safety inspection and have their titles upgraded to “rebuilt.” Cars like this, if properly repaired and otherwise mechanically solid, can be an inexpensive and reliable choice for everyday drivers. 

The problem is finding out which salvage cars are worthwhile.

What cars with salvage titles should you avoid?

You should stay away from any salvage-titled vehicle that has the potential to cause reliability or safety problems for you. This includes vehicles with:

  • Severe frame or unibody damage from a major crash
  • Rust, inside or out
  • Fire, flood or storm damage
  • Intermittent electrical and electronic problems
  • Safety systems, such as airbags, that don’t work

Other downsides of cars with salvage titles

Valuing them: Standard used-car valuation tools will default to a "poor" condition rating for vehicles with a salvage title. This usually means a value that’s 70% less than if the car had a clean title. With a rebuilt title, it will be valued somewhere around 40% less than if it had a clean title.

Insuring them: Most insurance companies do not want to insure vehicles with salvage titles. You should be able to get liability coverage, but collision and comprehensive coverage may not be available.

Financing them: Most lenders don’t want to finance these vehicles since their value is typically so low. Any loan that you're offered may have a very high interest rate and a short term. You may need to finance the vehicle with a personal loan or home equity loan.

Trading them in: Most dealerships will not accept a salvage-titled vehicle as a trade-in, due to issues with valuation and liability. You will either have to sell it to a private party yourself, at a very low price and with full disclosure of its history, or sell it to a junkyard.

» MORE: Get an estimate for your car repair

How to avoid a problem

While each state regulates the sale of vehicles with salvage titles, unscrupulous sellers will move these cars from state to state. A salvage title from one state can be "washed" when it is re-registered in another state with looser regulations. Once that salvage vehicle has a clean title, it can be moved around and resold as a normal vehicle, legally. 

This can make it very difficult to find a good car with a salvage title. If you have the time and motivation to dig deeper, here are some guidelines.

Buy from a reputable seller

There are many mechanics and body shops that rebuild cars with salvage titles and resell them to consumers. Check their online reviews.

Ask to see the original repair estimate

If you are buying a salvage-titled car from the insurance company that totaled it, ask to see the original repair estimate. This will give you a good idea of what kind of damage it had, and can help you figure out an appropriate value.

Get a vehicle history report

Find out where the vehicle was registered and serviced using a vehicle history report, such as Carfax. If it last was in an area that was recently hit by storms or floods, that could give you a clue to its history. 

Using the VIN, you can also investigate the vehicle’s history through the National Motor Vehicle Title Information System and the National Insurance Crime Bureau. These can help, but due to a lack of reporting from some states and junkyards, complete histories on certain vehicles won’t always show up.

Test drive the car

You should always thoroughly test drive any vehicle you’re considering buying. This goes double for a car with a salvage or rebuilt title. Here are some things to look for during your test drive: 

  • Does it start easily and idle smoothly?
  • Does the transmission shift smoothly?
  • Does the engine accelerate strongly and smoothly?
  • Do the brakes work without issue?
  • Does the suspension handle bumps and sharp turns well?
  • Do all of the electrical accessories work properly?
  • Are there any odd smells, sounds or smoke when you start it?
  • Does the heater or the air conditioner smell when you turn it on? 

Take your time and check everything. If the seller won’t let you drive it first, walk away.

Have a mechanic inspect the car 

For a reasonable fee, a mechanic can do a thorough inspection of a used car. This will tell you where any problems lie, and how much work it would take to fix them. Having this done before you buy is well worth it. 

Stephen Fogel

About the Author

Stephen has been an automotive enthusiast since childhood, owning some of his vehicles for as long as 40 years, and has raced open-wheel formula cars. He follows and writes about the global automotive industry, with an eye on the latest vehicle technologies.

No comments yet...

Sign in to comment