When a vehicle has been badly damaged due to an accident, repairs will cost more than the initial price tag, the insurer will calculate the remaining value and take possession of that vehicle. The insurer will then auction this vehicle to rebuilders or salvage companies. The vehicle will be issued with a red flag to warn prospective buyers that it has been declared valueless by the insurer. This is the vehicle with a red flag referred to as salvage title vehicle.
In the United States, most states have laws that regulate salvage title vehicles. These laws set out guidelines that determine the amount of damage needed to brand a vehicle with a salvage title. In most cases, a vehicle earns this title when the damage is between 60% and 80% of its total value. However, there some occasions when good vehicles are branded with a salvage title. For instance, a fender-bender can make your car branded with this title if its repair costs more than the vehicle’s value.
How a vehicle might get a salvage title?
There are different damages that can make your vehicle get a salvage title. Vehicles damaged completely with flood can get a salvage title. Various states have a specific name for this title but in most cases you will find them using the term salvage title. Hail can also cause damage to your car that costs more than the initial vehicle’s worth.
Another reason is theft recovery. If a vehicle is stolen and goes missing for a long time, the insurer can pay off the vehicle. If the vehicle is recovered, the insurer can decide to dispose it to the salvage company. The company will replace the missing parts and decide to sell the vehicle with a salvage title sticker on it. In fact there are a several reasons as to why your vehicle might get a salvage title. If your vehicle is damaged beyond repair, contact your insurance company and they will advise you accordingly.
Can you finance or insure a salvage title vehicle?
Financing and insuring a salvage-title vehicle is difficult. We are not saying that you can’t. You can actually finance and insure it but you will be in for a surprise. The reason is that few insurance companies are willing to write a comprehensive insurance if you purchase a salvage title vehicle. They find it difficult to set a value for these vehicles. When it comes to borrowing money from a bank or a lender, you are unlikely to get it. Actually, a bank cannot trust you with their money if your vehicle (collateral) is not protected by a comprehensive or collision insurance. So be prepared to pay cash if you are planning to purchase a salvage title vehicle.
Safety measures on salvage title vehicles
You need to practice utmost safety measures when driving salvage title vehicles. These vehicles can be really dangerous. Many vehicle rebuilding companies like to take shortcuts when repairing totally damaged vehicles due to the cost incurred and skills required.
For example, in 2003, Bobby Ellsworth was involved in tragic accident in San Diego and died on the spot. The police found that the truck that he was riding in had a salvage title. When the truck was inspected to determine the cause of that accident, it turned out that the airbags had been replaced with paper towels.
A study done by Washington Highway Alliance found that one out of 30 previous damaged vehicles are installed with dummy airbags. Lax federal oversight and vehicle inspection regulations make it easy for dishonest salvage vehicle rebuilders to skimp on airbags and other safety devices.
Is it difficult to sell a salvage title car?
The straightforward answer is yes. If you buy a salvage title car, know that you will own it forever. It is very hard to use this car as collateral and it can also be a challenge finding a buyer for this car
“I had tried to use my salvage title vehicle as collateral,” Sean John says, “but the deal didn’t go through. My bank realized that my car was a salvage title and said they couldn’t use it as collateral since it was not insured.”
In fact, the pool of potential customers is quite small when they realize your vehicle has a salvage title.
Be careful not to become a victim of fraud
You may be having a salvage title vehicle in your garage but fail to realize it. Some vehicles undergo title washing, and when buying a title washed vehicle, you will not determine whether it has been rebuilt.
Large insurance companies can fool you and sell you a salvage title vehicle. You may not realize this since you know they are reputable companies. For instance in 2006, State Farm was sued by forty nine state attorney generals for reselling thousands of vehicles without salvage titles.
General tips to avoid salvage title cars
- Before purchasing any vehicle, get it inspected by a trusted registered mechanic. Regardless of the condition of the vehicle, insist on inspecting it before purchase.
- Get a vehicle history report. There are reliable companies that you can approach if you want a genuine history report of your desired vehicle that you want to purchase.
- Understand the local policies regarding salvage title vehicles before you buy.
- Check whether the vehicle you want to buy can be insured before you buy.
- You can use the National Motor Vehicle Title Information System for the VIN of the vehicle you want to buy.