If you’re in the market for a used car, there’s a good chance you’ll run across a vehicle that looks great, has low mileage and is selling well below market value. Unfortunately, somewhere in the fine print you’ll probably find the words “salvage title.” Should you jump on the bargain or keep looking?
Potential challenges with salvage title vehicles include:
Indeed, salvage-title cars are so problematic that we recommend staying away from them entirely. If you’re bound and determined to buy one, though, or even just considering it, here’s a rundown of the problems you may face, along with advice on the best way to find an insurance policy for your newly rebuilt ride.
Salvage titles explained
If a vehicle is damaged and the repairs exceed a certain percentage of the car’s value, an insurer will decide it makes more financial sense to declare it a “total loss” instead of repairing it.
The value percentage that triggers such a totaling varies by state and insurer, but it’s typically between 70% and 90% of the car’s resale value. (In other words, if repair costs reach or exceed the given percentage, the car will probably be written off as a loss.)
Once a vehicle is declared a total loss, the insurer will issue a “salvage certificate.” At this point, the vehicle can’t be registered, driven or sold in its current condition. Most insurance companies sell the vehicle at auction to rebuilders or salvage yards.
However, if the car is rebuilt and passes a state inspection, it will then be issued a title — but the title will indicate the car is a salvage vehicle.
There are a number of reasons a vehicle can be totaled, so a salvage title does not necessarily mean a vehicle was in an accident. Reasons a salvage title is issued:
Insuring a salvage-title car
While it’s not impossible to insure a salvage-title vehicle, it may be more difficult to do so — especially if you require full coverage with collision and comprehensive.
Most insurance companies will write a liability policy for a salvage-title car but are often hesitant to include collision and comprehensive. For one, assigning an accurate value to a salvage-title car is challenging. According to Kelley Blue Book (KBB), a salvage-title car is typically worth 20% to 40% less than one with a clean title. If you make a claim on a salvage car, you should be prepared for a much lower “total loss” payout than you might expect from a car that’s “clean.”
The second reason is safety. Salvage cars often have lurking problems that may or may not be addressed in the process of restoring them to health. Not all rebuilders are honest, and cutting corners to boost profitability is fairly common. Either or both of these realities can result in a vehicle with structural and alignment issues that make it dangerous to drive.
If you are shopping for a salvage title policy, here are a few tips for finding the best coverage:
Some final tips
Again, we consider a salvage-title vehicle to be a risky buy that we don’t recommend. But if you’re ready to take the plunge or already have such a car in your driveway, here are a few final tips: