Can You Insure a Car with a Salvage Title?

Car Insurance with a Salvage Title

A salvage — or branded title — differs from a clean title. These cars have suffered severe damage, had the odometer altered, or have a defect that costs more to repair than the car is worth, typically between60 and 90 percent of the car’s actual worth, according to ValuePenguin. There is no standard definition for what qualifies a vehicle for a salvage title.

After a collision, most insurers pay about 80 percent of the car’s calculated market value. On some occasions, an insurance adjuster might deem a perfectly good vehicle a total loss. For instance, a hailstorm can cause thousands of dollars of damage to your car’s finish, leaving the mechanical systems as good as new, while a minor fender bender can cost more to repair than anolder model car is worth.

Once your car is granted this designation, your insurance carrier auctions it off to a salvage yard, where a shop might rebuild it. If it passes inspection, the state might issue a rebuilt title. There’s nothing inherently wrong with a restored car, and some reconstructed models reach near-factory standards.

Safety is another concern. A reconditioned car might have unaddressed issues, such as a bent frame, that got overlooked during the restoration process. These oversights can make the salvaged car dangerous to drive. The rebuild quality is difficult to determine unless you’re an automotive expert. A nonrepairable title means the car is unfit to drive, even with substantial repairs.

A car’s repair history can get erased when it moves from one state to another. That’s why it’s essential to get a vehicle history report to determine if your new car has a salvage title. Sometimes you can determine what type of title a car has by its color: green for clean and blue for rebuilt. However, the color designations vary by state.

Most insurance companies offer liability insurance for rebuilt salvage cars. However, few carriers provide full coverage insurance for these types of automobiles, as it’s difficult to assess any existing damage to the vehicle. Be prepared to shop around with multiple companies and get at least three to four quotes. Watch out for additional costs. Some insurers add a surcharge of up to 20 percent to insure a salvaged car.

Financing a salvage title car also is difficult without comprehensive and collision insurance to protect the lender’s interest, so be prepared to pay cash for salvaged vehicles, states HowStuffWorks.

Video

Step 2: Complete the required California documentation

On top of your repairs, you’ll need to file several documents at the Department of Motor Vehicles (DMV). 

First, fill out the Application for Title or Registration. This form requests a new certificate of title so that you can ditch the salvage certificate and get a new title for your car. The new title will acknowledge the salvage title history but show that the vehicle has been revived or rebuilt. 

California drivers will need to have proof of ownership with a salvage title and a salvage certificate in their name. If you purchased the car from out of state, you will also need a Statement of Facts. If your vehicle is less than 20 years old, you’ll also need to provide an Odometer Disclosure Statement. 

More Information

Nebraska Commercial Driver LicenseNebraska State Patrol Carrier EnforcementFederal Motor Carrier Safety Administration (FMCSA) Safer SystemUnified Registration System (URS)

Title/Lien Registration Records

Qualified business/professional use to view vehicle, title, lien and registration information. Please sign in with your Nebraska.gov subscriber login. If you are not a Nebraska.gov subscriber, sign up.

 

Getting a Clean Title for Your Salvage Title Car

When you, a repair shop, or a car dealer has done the necessary repairs on a damaged vehicle, you can take it to the DMV and get it inspected. If it passes, the DMV will issue the car a “rebuilt title.” A rebuilt title is also called a branded title, and it’s not the same thing as a clean title.

Rebuilt vehicles are good to drive like any other car, though keep in mind that the value of the car will be far lower than the value of a comparable car with a clean title. Unfortunately, your car’s branded title will always bear red flags if you try to sell or insure it. Car buyers and dealerships will pay less for it if they buy it at all, and some insurance companies will pass.

Title Name Games

It's important to note that attempting to conceal a car’s history in a way that isn’t totally “by the book” in your particular state is a serious crime called "title laundering" or "title washing." Every state’s auto-licensing regulations are different, and you should always check the unique registration requirements and titling rules of your state before considering a salvage title car.

The rules are fairly similar in most jurisdictions. Typically, once a vehicle’s title has been branded as salvage, it will never go back to the way it was titled before. In most states, however, the title can be rebranded as “rebuilt title” (or in some places “reconditioned” or “assembled”). This will require that you repair the vehicle and submit it to the Department of Motor Vehicles (DMV) for inspection. If it passes, the DMV will rebrand the title as “rebuilt.”

So, in a sense, the salvage title could be removed and changed to a rebuilt title—but only technically. Anyone who knows anything about vehicle titles (and car-history reporting services) will know from the word "rebuilt," it means it was formerly branded as salvage. That includes all insurance carriers and any knowledgeable potential buyers. If that’s a big problem for you, then you should skip the salvage game. If not, read on.

Are salvage titles bad?

Choosing a car with a salvage title can be dangerous if the car hasn’t been properly repaired or rebuilt. States typically require a “rebuilt title” and inspection if the car has been repaired to ensure that it’s roadworthy again.

But your safety could still be at risk. If the previous owner restored the car’s exterior, but didn’t fix important safety features like airbags, you could be seriously injured if you get into an accident.

Even if a car has been completely rebuilt, it may not have been repaired well. If there was significant frame damage, you may find that the doors don’t shut correctly or the windows don’t seal properly.

You’ll also want to watch out for “title washing.” Title washing means illegally removing a car’s branded title status. Dishonest auto sellers may apply for a new title for the salvage vehicle in a different state or withhold information on a new title application.

How can I check if a car has a salvage title?

Vehicle history reports, like those offered by CarFax and AutoCheck, can often alert you if a salvage title has been issued in the car’s history.

Lemon Laws

Under most state lemon laws, a dealer must, at no cost to the buyer, repair any problems with the vehicle over a specified period of time or provide for full reimbursement for the costs of such repairs.

In the event an auto dealer is unable to repair the vehicle after a reasonable amount of time, depending on a state’s lemon law statutes, the buyer is entitled to a complete refund of the damaged vehicle’s purchase price.

Your state department of motor vehicles has detailed information on state lemon laws, including an explanation on salvage titles, and how to properly identify them. Here’s a state-by-state list of U.S. motor vehicle departments.

Financing a Salvage Title Car

Getting a loan for a car with a salvage title can be difficult. If you don’t have the money handy to pay for the car in cash, then you’ll probably have to take out a personal loan to finance your purchase. This will probably be more expensive than an auto loan, but it may be your only option if you have to borrow money to buy the car. Many lenders won’t finance salvage vehicles because it’s almost impossible to get collision insurance coverage for them. Lenders require this coverage to protect their investment. Insurers are also wary because of the many mechanical risks that salvage title cars have.

Frequently Asked Questions

  • When an insurance company deems a car totaled and not worth repairing, the DMV issues a salvage title, and the car cannot be legally driven until it obtains a rebuilt title by passing a thorough DMV inspection.

  • Salvage title cars are cheaper than comparable vehicles on the market, but they come with real risk. Hidden damage can explode the vehicle’s repair cost after you’ve brought it to a mechanic. Before you buy, get a salvage title car checked out thoroughly by a repair shop that you trust, and do all the research you can on the car’s VIN to know its history.

  • If your salvage title car is fixed up and ready for the road, bring it to your state DMV and set up an inspection. Then, if it passes, it will be issued a rebuilt title, also called a branded title. You can’t get a clean title for your salvaged car. But you’ll be ready to drive.

  • A chunk of insurance companies won’t insure salvage vehicles. If you like your insurance company, call them first to see if they’ll insure your car with a salvage title. For a bird’s-eye view of all your best options, spend a few minutes with Insurify, and you’ll get a slate of real quotes just for you, totally free.

How much does a rebuilt title affect a cars value?

You can expect a rebuilt title to knock between 20% and 40% off the car's value. That's the rule of thumb used by the industry.

The Signs of a Salvage Title Car

While you should always check the vehicle history report and have a trusted auto mechanic review the vehicles for problems, there are obvious signs that a vehicle is basically a rebuilt lemon and should be avoided.

Look for these tell-tale signs:

  • Most states require direct identification of the vehicle that’s been in a salvage situation on the title. Ask to see the title before anything else.
  • The vehicle paint easily chips off or doesn’t match the rest of the vehicle (This could indicate an intent to hide damage by the seller.)
  • A Certified Automotive Parts Association (CAPA) sticker on any vehicle part or component could signal collision repair.
  • Any wheel misalignment could point to frame collision damage.
  • A car door that doesn’t open or close properly could also mean the vehicle underwent major repairs (and was improperly repaired)
  • If the vehicle’s hood is misaligned and doesn’t close perfectly, that could be an indicator of a major collision impacting the front and sides of the vehicle.
  • If your electrical components don’t work properly—especially if they flick on-and-off intermittently—that could be a sign of significant flood damage to the vehicle.

Step 4: Go to the DMV

Once you complete the repairs and you have your application and completed inspections in hand, you can go to the DMV.  Take the CHP 97C form to the DMV to begin the registration process, and pay a non-refundable fee as part of the application. After the DMV’s approval, it can take between four to six weeks for your new title to be mailed to you. 

How To Insure a Salvage Title Car

In most cases, it’s very difficult to get car insurance on a salvage title car that provides more than basic liability coverage. This is because insurers don’t have any way to establish an accurate value for the car. They also can’t verify that the car has the same safety standards as a car with a clean title. For these reasons, it is almost impossible to get collision or comprehensive coverage on a salvage title car. 

If you want to get auto insurance on a salvage title car, you should shop around to see who will insure you and offer the best rates. Some insurers may offer special policies for these cars. But you should generally be prepared to pay more for your insurance than you would for a car with a clean title.

How to Insure a Car with a Salvage Title

If you have a car with a salvage title that you'd like to fix up and return to the road, you'll need to consider your options for insuring it. Again, the rules can vary by state and from insurer to insurer.

Some insurance companies may be willing to sell you basic liability coverage for a salvage vehicle that’s been rebuilt or restored, while others may not. Depending on the state, you may need to obtain a separate rebuilt or restored vehicle title that certifies the vehicle’s safety before you can get insurance and drive it on the roads.

If you’re shopping for insurance, take time to compare companies. Look at the premiums they charge for at least the minimum level of coverage that’s required in your state. Also think about whether paying extra for collision and comprehensive coverage is worth it, based on the vehicle’s estimated value. (Though liability coverage is mandatory in virtually every state, collision and comprehensive, which pay for damage to your car, are optional.)

Important If you're considering buying a salvage or rebuilt vehicle, plan to have it checked out by a trusted mechanic to help spot any potential issues before money changes hands.

What Is a Salvage Title?

A car title is a legal document of who owns a vehicle. If you own a car outright, with no loans against it, then you likely have a car title in your name.

A salvage title not only indicates who owns the vehicle but also that it has been damaged beyond its fair market value and declared a total loss by an insurance company.

What constitutes a total loss depends on the insurance laws in your state. For example, in Nevada, a vehicle is considered a total loss if the damage exceeds 65% of the fair market value. Nevada also classifies flood-damaged and unrepairable vehicles that are only suitable for scrap as salvage vehicles. In New York, on the other hand, the damage must exceed 75% of the car's fair market value.

Salvage titles tell potential buyers what type of damage the vehicle has incurred. That could be flood damage, fire damage, or damage related to an auto accident. The salvage title process can also ensure that a vehicle has not been rebuilt or restored with stolen or defective parts.

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:

Financing may be difficult. Because it’s difficult to value a salvage-title car and there are insurance issues to consider, it can be hard finding a lender. Be prepared to pay cash. Understand local laws. Damage thresholds and inspection requirements vary by state. Research local laws so you know what you’re getting into with a salvage-title car. Run the VIN through databases. The National Motor Vehicle Title Information System is a federal database designed to limit title fraud. Search the vehicle identification number (VIN) of any vehicle you are considering. Also, you should pull a vehicle-history report for the car through Carfax or AutoCheck; again, you’ll just need the VIN. Prepare to buy for life. Salvage-title vehicles can be very difficult to sell. If you purchase one of these, be prepared to drive it until the wheels fall off.

Tags