Should you buy a car with a salvage title? – Forbes Advisor
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A car with a salvage title has been badly damaged (e.g. in an accident or flood) which usually means you can buy it for much less than market value. While saving money on a used car is attractive, you might want to think twice before buying a car with a salvage title.
Here’s what you should know about buying a car with a salvage title.
What is a Salvage Title?
A residual value right is attributed to a vehicle whose extensive damage and repair costs approximate or exceed the actual value of the vehicle. This type of title is a type of “brand title” that indicates damage to the vehicle that both the owner and potential buyer should be aware of. A marque title could also be marked as “rebuilt”, meaning the recovered car has been rebuilt and qualified for registration and registration after passing inspection.
It’s not always obvious if a car has been damaged, which is why many states require the seller of a car with a salvage title to disclose this information. However, not every state has these laws, so it’s important to familiarize yourself with your state’s requirements before purchasing a car.
Also, keep in mind that the requirements for obtaining a salvage title may vary by state. For example, in New York and many other states, a vehicle’s title is branded as scrap if the total repair cost is 75% or more of the car’s market value. However, some states such as Florida will issue a salvage title if the vehicle is determined by the insurance company to be a total loss.
How to buy a car with a salvage title
If you decide to buy a car with a salvage title, follow these four steps:
- Get a full inspection. Before you buy a car with an accident record, be sure to have it checked out by a mechanic you trust – don’t just rely on the owner’s description of the vehicle’s current condition. That way you know what kind of damage you might be dealing with when you buy the car.
- Check the history of the car. Double check what caused the vehicle to be assigned a salvage title. You can visit the National Motor Vehicle Title Information System (NMVTIS) to get a vehicle history report from one of its data providers. Also, be sure to ask the seller for receipts and estimates for the repairs, or contact the body shop that did the work.
- See when the salvage title was issued. A car that received a salvage title years ago but has been driven reliably since then is generally safer than a vehicle that was recently damaged.
- Consider your financing options. Lenders typically consider salvage cars to be very risky investments, which could make it difficult to obtain a loan for this type of vehicle. You may have an easier time getting a collision insurance car loan if you have a good relationship with your bank or credit union and have good to excellent credit. Or you could take out a personal loan that doesn’t require collateral.
Should I Buy a Salvage Title Car?
Usually no – these types of vehicles come with several major risks that you should not ignore. But in some cases, buying a salvage-titled car can make sense — although you’ll first need to dig deep into the vehicle’s history to see whether or not it’s actually a good deal.
Let’s say you’re interested in a car that has a clean history with two previous owners, no accidents, and comprehensive maintenance records. However, after the second trade-in, it was exposed to a hailstorm on the dealer’s premises and declared a total loss, although there was no damage under the hood or in the interior. If you can live with the dents on the car’s body and maybe have some of them fixed, you may have found a great money-saving deal.
Or say a stolen vehicle was reported to the police and recovered within 24 hours before any parts were removed. While the vehicle will likely be given a salvage warrant by the state for being stolen, it might still be worth buying since the car sustained no damage.
But outside of those unusual kinds of circumstances, it’s probably better to consider other used cars with clean titles to avoid the risks.
Pros and cons of buying a salvage car
If you’re thinking about buying a car with a salvage title, there are a few pros and cons to consider.
Benefits of Buying a Salvage Title Car
- You can save money. Typically, you can buy a junk title car for 20% to 40% less than market value compared to a clean title vehicle.
- You might find a car with little damage. A salvage title doesn’t always mean the car was wrecked. For example, you might find a heavily discounted salvage-titled car that was stolen and recovered before it was disassembled into parts, or that only suffered minor cosmetic damage. Even if the car needs some minor repairs, the repair can end up costing you far less than what you would have spent on any other vehicle.
- The vehicle could be used for parts. If you are restoring a vehicle that requires hard-to-find, expensive parts, then it might be worth purchasing a car with a scrap title with the parts you need. Or you might decide to fix the salvage car yourself.
Disadvantages of Buying a Salvage Title Car
- The car could be badly damaged or no longer safe. It can be difficult to gauge how much damage you actually have just looking at a car – which means you end up spending a lot more on repairs than you originally anticipated. There are also reports of lawsuits about auto repair shops compromising vehicle safety.
- A risk of fraud. Unfortunately, sellers don’t always tell the truth about the damage that resulted in a salvage title. If you buy the car and it needs major repairs, you have little recourse.
- Difficult to qualify for insurance or financing. Insurance companies typically offer limited coverage for salvage title cars — and sometimes don’t offer coverage at all. It can also be difficult to find a bank or credit union willing to offer a loan for a car with a salvage title.
Can you insure a car with a salvage title?
Because a car with a salvage title is not considered roadworthy, you typically cannot purchase insurance unless the vehicle is rebuilt and passes safety inspections. But even then, many auto insurance companies don’t offer coverage for cars with converted titles.
If a company offers insurance for such a car, it is usually only liability insurance that does not cover the costs of damage to the accident vehicle in the event of an accident.
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The final result
While buying a car with a salvage title can save you money, it comes with several risks that can far outweigh the benefits. If you are considering purchasing a salvage titled vehicle, make sure you do your research to understand exactly why the car has a salvage title and what repairs are required to be considered safe and roadworthy.