We have people ask us all the time, “Should I buy a vehicle with a salvage title?” Our answer varies based on who's asking: a salvage or rebuilt title can easily cut a vehicle’s value in half, which could mean a huge discount for the buyer or a huge financial loss for the seller.
It’s important to understand the differences between salvage titles, prior salvage titles, and rebuilt titles. Problems can arise because some states define these differently than others, so today we're going to talk about salvage and rebuilt titles. But let’s start from the start:
What is a Salvage Title?
In the United States, a salvage title is issued to indicate that an insurance company has previously deemed the vehicle a total loss. A salvage title can be the result of a collision, theft, abandonment, vandalization, or weather events such as hail or flooding. In all states, insurers are legally required to apply for a salvage title once the damage exceeds a certain percentage of the vehicle’s value.
Quick facts about salvage titles:
· The same car cannot be “salvaged” multiple times
· A salvage title can never be “clean” again
· Insurance will not total a car more than once
· Prior salvage vehicles may be subject to limited insurance coverage
Each state has a different salvage title threshold, and that can cause problems for future buyers.
Figures accurate at the time of publishing. Data source.
How Is a Salvage Status Determined?
If the cost to repair a vehicle meets or exceeds X percent of its overall value prior to the loss, the vehicle will be assigned a salvage title.
In states that operate on the Total Loss Formula (in yellow), repair costs plus the vehicle’s post-accident scrap value must total the vehicle’s value prior to the loss. This approach evaluates each vehicle individually, so mileage, modifications, and overall condition will have a greater effect on the outcome here than in other states.
Alarmingly, two states feature a salvage threshold of 100% and three have a threshold of less than 70%. In the lowest-threshold state, Iowa, a minor accident could easily cause a vehicle to carry a salvage title branding.
Of course, that vehicle could later be sold in states with higher or lower salvage thresholds. Therein lies the problem.
The Dangers of Salvage Titles
It’s easy to spot a salvage title – it’s often clearly marked on the front.
It’s important to know the cause of a salvage title for three main reasons:
· Repair shops don’t always use OEM-quality parts
· Repairs aren’t always done correctly
· The car’s longevity may be compromised
The process of hiding a title’s sinister past is called title washing. Learn more about the dangers of title washing in our recent post, and note the following information related to the data above:
Damage could be hidden. In Colorado and Texas, a vehicle could sustain damage totaling 99.9% of its market value and not be required to carry a salvage title. If the seller chooses to hide that information and if the buyer fails to investigate further, extensive repairs could go unnoticed. That same car would carry a salvage title if the damage happened in any other state.
The damage could be less serious. Conversely, an Iowan, Nevadan, or Oklahoman could be involved in a far less serious accident and yet their states would assign a salvage title. This would reduce the car’s value in surrounding states even though the car wouldn’t have been deemed a total loss had the accident happened there.
Confused by why it works this way? Don’t worry, everyone is.
Salvage Titles Aren’t Always Bad
Since it’s possible for a vehicle to be branded salvage without it taking any damage, you may have nothing to worry about. Or the damage may have been purely cosmetic; a motorcycle can often be deemed a total loss after simply being dropped on its side.
Salvaged cars are usually much cheaper than their clean-title counterparts, and if you’re looking for a project or have technical know-how you could save lots of money on your next car. Just be sure to keep that value in mind when you resell the car.
What is a Rebuilt Title? What is a Prior Salvage Title?
Once a salvage vehicle has been repaired it must be inspected by a state agency (commonly the Highway Patrol) before being used on public roads again. The state will then issue a rebuilt or prior salvage title to designate that while the vehicle is presently roadworthy it was once deemed a total loss. It will be branded as such.
Insurance companies may only offer reduced coverage even if a vehicle carries a prior salvage or rebuilt title.
A salvage, prior salvage, or rebuilt title is a serious thing that shouldn’t be taken lightly, no matter what the seller says.
This seller does not mention the title status in the description.
Say that Last Part Again?
Yeah, we’re throwing shade. It doesn’t matter what the seller tells you about their car’s salvage title, you need to do your own research. You wouldn’t believe what people will do to make a dollar these days… things that make covering up a car’s history look like a walk in the park. Even if they’re being truthful the seriousness of the damage may not come across; phrases like “it wasn’t that bad” or “it was just cosmetic” are completely subjective.
Dealerships have also been known to wash titles. Some dealers even claim they can magically “turn a salvage title into a clean title.” They can’t (not legally, anyway).
When investigating a salvage title, a buyer should take the same precautions as they would with a potentially stolen vehicle. A VIN check or Carfax report will reveal the truth about the title’s history. If the seller objects to these measures or won’t reveal the car’s VIN number, they probably have something to hide. Walk away and don’t look back.
What Precautions Can I Take?
The best thing you can do? Always check the vehicle’s VIN before making a purchase.
We offer a $10 VIN Check on our site. It doesn’t make us money, we just want to help you make the best car buying decision possible. That check will reveal the cause for a salvage title, the date the claim occurred, the state it happened in, and any other accidents on record, plus other useful details including the car’s service history.
Professionals can easily spot repairs that may not be obvious to the untrained eye. If you’re not car savvy, it’s best to have a shop or repair facility do a Pre-Purchase Inspection on any vehicle you get serious about buying.
If you have any questions about the VIN Check process or titles in general, please contact us and we’ll be glad to help. This article is not legal advice.