What Is a Salvage Title and How Does It Impact a Vehicle?

What are the differences between a salvage title and a rebuilt title?

To help you have a better understanding of what each title means, here is a closer look at both:

What is a salvage title?

A salvage title is designated for when the vehicle’s repair costs outweigh its market value and the vehicle is considered totaled. This normally happens when an insurance company writes off the vehicle as unrepairable. Some of the most common reasons why a car might have a salvage title are accidents, weather (especially flood damage) or the car was stolen. Vehicles given a salvage title may not be safe to drive due to the danger posed because of its extensive damage.

What is a rebuilt title?

When a car with a salvage title has been repaired, it can receive a rebuilt title. This notifies the buyer of the previous history of the vehicle. To receive a rebuilt title, the vehicle must pass a series of tests to ensure it is safe to drive in some states. However, in other states, there might not be any requirements to inform prospective buyers of the vehicle’s history.

Can a previous damage title or salvage title ever be replaced with a standard one?

Either title will serve the purpose of making sure all subsequent owners of a vehicle are aware of any previous damage. Therefore, it is not possible to have either replaced with standard ones at any point in the future.

Some unethical sellers will move the salvage title vehicle from state to state to try to get a clean title, so they don’t have to disclose the damage. This is called title washing and is illegal. Always run a report before buying a car to check for any damages.

This is one of the reasons that rebuilt title cars are usually not restored. One exception to this rule is an undamaged car that might be found at a salvage yard simply because of its age.

For example, if muscle cars are wrecked but repairable, they can be stripped down and restored if they’re in good condition. Such cars can be given a clean title as long as they haven’t sustained significant damage.

Regulations regarding these types of situations are different from state to state, so it’s best to check with your motor vehicle department for specific details.

Although previous damage and salvage titles may seem to be a hassle, they are intended as protection for car buyers. Salvage title cars will generally require a larger financial investment.

Knowing this ahead of time is important in deciding whether or not a salvage title vehicle is right for you.

Need to buy salvage title car insurance? If you’ve purchased a previously damaged car, you can compare salvage title car insurance rates online by entering your ZIP now.

References:

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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.

Sometimes You Need a Certified Mechanic

As much as The Drive loves to put the “you” in do-it-yourself, we know that not everyone has the proper tools, a safe workspace, the spare time, or the confidence to tackle major automotive repairs. Sometimes, you just need quality repair work performed by professionals you can trust like our partners, the certified mechanics at Goodyear Tire & Service.

Repairing a hood. , Depositphotos

What are some advantages and disadvantages of having a salvage or rebuilt title?

Purchasing a previously damaged vehicle can be a risky move, but if you know what you’re doing, it could also be a smart move. One advantage of vehicles with a salvage or rebuilt title is that they generally cost much less than those with clean titles. In fact, salvage or rebuilt vehicles generally cost 20%-40% less than the same type of vehicle with a clean title, according to Kelley Blue Book.

On the other hand, purchasing a car with a rebuilt title can lead to more costs in the long-term if the repairs previously made were not up to par. When you purchase a salvage rebuilt vehicle, you are accepting that extensive damage has occurred to the vehicle. In some cases, there may still be undisclosed or unseen damages that could arise at a later date.

Likewise, even if the vehicle has been fully repaired, you may have trouble finding insurance coverage for the car. In many cases, those carriers who insure vehicles with a rebuilt title may charge the same premium as a similar vehicle with a clean title, even if your vehicle is worth much less.

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.

How to Insure Your Salvage Vehicle

Be warned: not all car insurance companies will sell you a policy for a car with a salvage title, and when they do, it may be expensive. If you already have car insurance, check with your insurance provider to see if they’ll cover it. Because it can be hard to estimate a car’s market value, not all car insurance companies will provide your car with a full-coverage policy.

3: The Car Is Being Sold for Parts Only

Sometimes, cars that receive salvage titles can only be sold for parts and not legally driven. Hemera/Thinkstock

One of the restrictions on salvage-title cars in most states is that they cannot be legally operated on the road. Some states go one step further, declaring certain salvage-title cars as being too damaged to rebuild. These cars can only be sold for parts.

This is a situation where a savvy home mechanic could obtain useable parts for a bargain price. If you have a vehicle you repair yourself, and you have the space and tools necessary to stockpile, clean and organize the parts, buying a "parts car" can provide a cheap source of parts — especially if your car is older, rare or no longer supported by manufacturers’ parts suppliers.

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The drawback to buying a salvaged car for parts comes when you complete the sale. In some states, only licensed rebuilders can purchase salvaged cars. Check your state’s laws before making a purchase [source: QuinStreet Insurance Agency Inc.].

If you can purchase the salvage-title car, think before you act: How will you get it home (it’s not licensed, so you can’t drive it)? Do you have room to store it without violating any "junk car" ordinances in your community? Do you have the tools, time and knowledge to disassemble it, and do you have a plan to store the parts until you need them? Thinking through these questions is important, to ensure your parts car doesn’t become a useless eyesore if it’s stored incorrectly in the wrong place.

How Does a Salvage Title Work?

When a car has been declared a total loss, either its owner or the insurance company can apply for a salvage title. Which party does so depends on who plans to retain possession of the vehicle.

If the owner chooses to keep a totaled vehicle or didn't have insurance coverage, they would be responsible for applying for a salvage title. If the insurance company repossesses a damaged vehicle after declaring it a loss, the insurer would apply for the salvage title.

Salvage titles can be obtained through the state department of motor vehicles. Though the process varies from state to state, it typically involves filling out an application, paying any required fees, and submitting the car to a salvage vehicle examination. The examination will assess the extent of the damages and the vehicle's overall condition.

A salvage inspection is not the same as a regular safety inspection or emissions inspection. It may vary by state, but in the state of Massachusetts, the examiner will do all of the following during an inspection::

  • Verify that the vehicle identification number (VIN) of the car matches the number shown on the application.
  • Check the odometer to make sure the mileage matches the application.
  • Compare the vehicle's condition to what's stated on the application.
  • Verify that the vehicle's parts haven't been removed, defaced, destroyed, or otherwise tampered with prior to the inspection, beyond the damage that has been reported.

If you go in for a salvage inspection, you may need to bring certain documents with you, including your application for the salvage title, a receipt showing that you paid the appropriate fee, a copy of your insurance company's damage or appraisal report, and a bill of sale for any repair costs or parts you purchased.

9: The Car Was Stolen and Recovered

If a stolen car isn’t recovered right away and is replaced by the insurance company, the original car may receive a salvage title when it’s found. iStockphoto/Thinkstock

According to 2010 statistics, a car is stolen in the U.S. every 33 seconds [source: Neff]. Insurers often act quickly to help their clients get back on the road after a theft, which leads to the second reason the car of your dreams may have a salvage title: It was recovered after being stolen.

Not every car that gets stolen ends up with a salvage title. If the car is recovered quickly, the police may simply return it to the owner. In cases where the car is not recovered for weeks or months, the insurance company may have already replaced it for the owner. In essence, the insurance company writes off the original car as a total loss. The car, when recovered, is then titled as if it had been written off due to a totaling accident.

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A car given a salvage title for a non-damage reason can often have the title changed to a rebuilt title, a designation that then allows the owner to operate it legally on the street. Often, this simply requires a state inspection for safety, although the details of the inspection and re-titling process vary from state to state [source: Salvage Title Cars].

If you’re interested in a car that has a salvage title, and the owner claims it was stolen and recovered, find out why the car hasn’t been re-titled yet. The owner should have done this before offering the car for sale as a matter of good business; failure to do it may be a sign that there’s something else wrong with the car.

How much does a salvage title reduce a vehicle’s value?

Typically, a salvage title reduces a car’s value by 20% to 40%. However, the loss in value depends on the extent of the damage and repairs needed.

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:

Shop around. Roughly 20% to 30% of insurers will not insure a salvage-title vehicle, so you will need to shop around. Contact your current insurer to see if they offer coverage. If they don’t, start shopping. Be prepared for an inspection. Some insurers will require an inspection and appraisal before they will insure a salvage-title car. If you disagree with the appraisal amount, then you should try to negotiate a higher amount or continue shopping for a new policy. Even if an inspection isn’t required to insure the vehicle, you may want to get one anyway. Before buying, have a trusted mechanic thoroughly inspect the vehicle. Get a repair estimate. If possible, get the original repair estimate from the rebuilder or the insurance company that totaled the car. This can give your insurance company peace of mind that all damage has been repaired. Prepare to pay more. Pricing will also vary by insurer, but you shouldn’t expect a break on your premiums for a salvage car because you got a deal on the purchase price. If anything, the opposite will be true: Some insurance companies will add a surcharge of up to 20% to the policy when insuring a salvage-title vehicle. Consider less-than-full coverage. Consider getting a liability-only policy, which financially protects you if you injure another person or their property. It will not cover the cost to repair your own vehicle. Liability only insurance is much easier (and less expensive) to get with a salvage-title car.

Methodology

The car insurance quotes displayed are based on an analysis of Insurify’s database of over 40 million quotes from 500 ZIP codes nationwide. To obtain representative rates, Insurify’s data science team performs frequent comprehensive analyses of the factors car insurance providers weigh to calculate rates including driver demographics, driving record, credit score, desired coverage level, and more.

Insurify’s analysis also incorporates the Insurify Composite Score (ICS) assigned to each insurance provider. The ICS is a proprietary rating that weighs multiple factors reflecting the quality, reliability, and health of an insurance company. Ratings used to calculate the ICS include Financial Strength Ratings from A.M. Best, Standard & Poor’s, Moody’s, and Fitch; J.D. Power ratings; Consumer Reports customer satisfaction surveys and customer complaints; mobile app reviews; and user-generated company reviews. 

With the above insights and ranking methods, Insurify is able to offer car insurance shoppers insight into how various insurance providers compare to one another in terms of both cost and quality. Note, actual quotes will vary based on unique attributes including the policyholder’s driver history and their garaging address.

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