This article explains what Salvage Title means and why cars end up with a salvage title.
Most importantly we will share with you information on how much cars with salvage title sell at car auctions and what they sell for in the private party market. By the end of this article, you can make an educated decision on whether a salvage title car is worth it. We will also look at several real cars and the damage they had to be deemed a salvage car.
What is salvage title?
A salvage title means that the car was declared a total loss by the insurance company. In most cases, this is because the cost to repair the vehicle excesses 75%* of its market value.The most common reason to get a salvage title is that a car has been wrecked and ends with a title branded Restored or Salvage (not always, more on this later).
*The exact percentage can range between 60% and 80% or higher. Some states have requirements on this while others don't and leave it up to the insurance company.
How does salvage title process work?
You get in a car accident. The insurance company has determined that it will cost over 75% of the value of (the current fair market value) the car to fix it. Let us assume that your car has a current market value of $10,000. It will take $8,200 ( Over 75% of its value) to fix all the damage. In this case, the insurance can declare the car a total loss. They pay you the owner the market value of $10,000. In turn, the insurance company takes the car from the owner and sends to an auction like Copart where they try to recover as much money as possible by selling the damaged car. During this process, the insurance company will apply for a salvage certificate of the local motor vehicle division (DMV, MVA, MVD). A car dealer or a body shop buys the damaged car for a fraction of the market value (more on this later) and repairs it. The car has now become a salvage vehicle and is back on the car market for sale.
Salvage title branding doesn't always work
Salvage title branding doesn't always work. What do we mean? Some cars may have been involved in major accidents but never got a salvage title.
How is that possible?
Rember that the insurance company is the one that evaluates the damage and determines when to declare a car total loss. There are other cases when cars are involved in serious accidents, but they never get a salvage title. Let's explore a few of these cases.
- Self-Insured and Rental Companies
There are large companies that are self-insured. That means they don't need Geico, Liberty Mutual or a car insurance to insure them. They provide their bonds and insurance coverage. A few examples are large corporations, local and federal government and rental companies. When these cars get involved in severe accidents, it is up to these companies to decide what to do with the cars. Often they send them to car auctions to recover part of the value of the car. They can sell them as parts title, salvage title or even clean title.
Often these cars have been involved in accidents, some of them severe enough to deploy the airbags. These cars are not only sold without a salvage title but often may be sold as a CLEAN TITLE.
For example, here we have a wrecked 2017 Chevrolet Malibu with under 1,748 miles. Not only has this vehicle been wrecked but you also can see that the airbags have deployed. It is being sold with a clean title. Watch the video to see how much it sells at the salvage car auction.
- Liability only insurance
Let's say you are the owner of a Honda Civic and have already paid the car loan. To save money, you change the vehicle insurance from full coverage to liability only. One week later you rear end a Toyota Corolla. You are the one who caused the accident and were at fault. Your insurance company will pay for the damages of the other car, Toyota Corolla. You have to pay to fix your car insurance to liability only. Even though the Honda Civic has considerable damage, it never gets a salvage title because the insurance company doesn't have to worry about your car. You fix it yourself or find a cheap body shop to fix your Honda. If you had full coverage, your Honda Civic would have been declared a totaled by the insurance company because it would have cost too much to fix it properly.
There are cars that have serious damage due to an accident but never get issued a salvage title when in fact they should. You may be driving one of them and never know. Everyday cars that are sold at car auctions such as Manheim and Adessa can have a considerable amount of damage, but yet they never get a restored title.
Most common reasons why a car gets restored title
A car can get a salvage title for multiple reasons.
If the vehicle was involved in a major accident. In most cases, the cost to repair the vehicle is over 75% of the value of the car. This value in some cases is enforced by the state or is left up to the insurance companies.
If the car was stolen and then recovered weeks later, it might also end up with a salvage title. The vehicle needs to be missing for a period of time of days for it to get a salvage title.
- Flood damage
Sometimes a flooded car will get a salvage title. Not always and the rules vary by state. Some states may not have a branding for flooded vehicles, or they use salvage title branding.
A car that has been vandalized such as spray painted may also get a salvage title. The insurance company decides that it will cost more than what the car is worth to repaint the vehicle. This can be the case of an older car.
Is buying a car with a salvage title a good idea?
You will find many car owners who only drive vehicles that have restored title. There are countless articles online that will advise you that buying a car with a salvage title is not a good idea. The truth is that both can be right. A car that has salvage title can be a bargain, or it can be the worst mistake you have ever made. To help you avoid costly mistakes here is some guidelines to keep in mind when buying a vehicle with a salvage title.
- Never pay more than 70% of the market value for a car with salvage title
Check out the listing of similar cars in your area. What is the price they sell for? Research the make model, year and mileage. Check KBB and NADA used cars private party values. These services don't offer to price salvage cars. To get an idea, multiple the private party valuation with 0.7.
- Make sure the vehicle is repaired properly
Ensure that the vehicle has been properly repaired. If the dealer or the person who is selling the car is the first "salvage title" owner, they may know what the car looked like after the accident or why it has a branded title. Ask them for pictures or details of how the car looked before it was repaired. You don't want to buy a car that is welded up from two different car bodies.
- Always perform a pre-sale inspection.
Take the car to a mechanic or the dealer and have them perform an extensive inspection. Tell the mechanic to check the car carefully for frame and body damage and shady repairs. The mechanic will check the mechanical condition of the vehicle, but they should also check for body and frame damage during the inspection. You will have to pay $100-$150 for such inspection, but it will be worth it.
Which salvage title to avoid?
- Avoid Flood Vehicles
We would avoid flood vehicles. The issue with flood cars is that water could have gotten into electronic components. While everything with the car may seem to be working fine now, in a few months or years, corrosion can cause all sorts of electrical malfunctions and nightmares. It is better to avoid salvage title vehicles that were branded due to flood damage unless you know the history of the car and are confident that water didn't get into any of the electrical components, engine, and interior.
- Junk Title Vehicle
Some states may issue junk title or part title for vehicles that have been involved in major accidents. These vehicles have considerable damage and should only be sent to the junkyard. Most states don't issue titles for these vehicles, but a few states do. Some of these cars end back up on the road. Our recommendation is to avoid with Junk / Scrap title.
How much are salvage title cars worth?
It is difficult to price cars that have a restored title. Evaluation tools such as Kelly Blue Book and Edmunds don't provide pricing information on cars with a salvage title.
Rule of thumb
If you have found a salvage car that you want to buy, don't pay more than 70% of its market value. (Assuming the vehicle has been repaired and is in good working condition).
Check out similar listings of the same car in your area. Determine the value of the car with a salvage title and multiple that with 0.70. Let's say you come to the conclusion that the car would normally be listed for $8,000 assuming it has a clean title.
Multiply $8,000 x 0.7 = $5600 is the most we recommend that you pay for that car. The car should be in good condition, running and properly repaired. Why should you pay any more? Depending on the amount of damage that vehicle most likely sold for around 25% to 30% of the market value at the auction. The seller could have picked up the car for $8000x0.3= $2400. If they are smart, they shouldn't have spent more than $2000 to rebuild the car. Which means they have around $4400 invested in the car.
It is not advisable to pay full market price for a car with restored / salvage title.
Now let's look at how much cars with salvage title sell for at auto auction.
For example, this 2016 Hyundai Sonata has an MSRP of $24,500 and average retail value of $17,000 assuming the car has a clean title. At the time of this writing, this was a one-year-old car. At the dealer, auctions would typically sell for $12,500. Now, check out what this Sonata which has a restored title sells for at a car the salvage auction. (Sold on March of 2017)
Pros and Cons of Buying a Salvage Car
- Great Deal
You can get a great deal on a car with a salvage title. If the car is already fixed you may get it for only 2/3 of its fair market price. If the car is wrecked as low as 1/2 of the market price.
- Resale Value
Salvage cars have lower resale value. Keep in mind that if you get into another car accident and your salvage car gets totaled a second time you won't get as much money for your car. The insurance companies won't pay you full price on a car with previous salvage history.
- Insurance Coverage
You won't have any problem getting liability insurance on a car with salvage title but if you need to have full or comprehensive insurance policy expect to have a hard time finding an insurance company that will do that.
- Warranty Coverage
If you buy a new model car with restored title your dealer won't provide any warranty and maybe not even recalls in some cases. You may get a great deal on a two-year-old vehilce but what if there is a major defect with the engine a year latter? You are on your own. The dealer won't replace the engine for free since your car has salvage history.
- Repair Quality
Cars can end up with a salvage title for something as minor as a hood and bumper damage to cases where half of the car is wrecked and you need a donor car. We often see salvage cars that haven't been properly repaired and in some cases not even painted by a professional. That's why it is important that you should always perform a pre-sale inspection on a car with a salvage title.
Where to buy salvage cars?
If you are an individual looking for a good deal on a salvage car check out Salvage Cars for Sale. You have the added protection that eBay offers. If you are a car dealer and are looking to buy wrecked cars you can register with Copart, the largest wholesaler of wrecked vehicles. Make sure to follow our tips above when purchasing a car with a restored title.
Everyone may advise you to avoid a salvage car. The truth is that salvage title cars can be a great buy or the worst purchase you ever made. If you aren't prepared and don't know what to look for, you probably should NOT purchase a salvage / restored car. Always find out why the car has a salvage title. If the car has a branded title, don't pay more than 70% of its market value if it is repaired. Pay even less if the car is still wrecked.
Frequently Asked Questions
Can I get insurance for a car with a salvage car with a restored title?
Yes. Most insurance companies will provide liability coverage for cars with a restored title. Keep in mind that if you find an insurance company that will offer full coverage on a car with a salvage title, the insurance won't pay you the full market value if you end up totaling your car.
Is it bad to buy a car with a salvage title?
Yes and No. You can get a great deal on a car with salvage / restored title. In some cases, these cars have minor damage. A car with salvage title may have only needed a new fender, hood, and bumper. The airbag may have never been deployed. As long as the car was properly repaired you should be fine. In some cases, a car may have been stolen and found three weeks later. The car can have a salvage title but its structural integrity was never compromised. The bottom line is that you may be able to get a great deal on a salvage car but always do your homework. For more details Check the pros and cons of buying a salvage car above.
How to get a salvage car?
You can buy cars with salvage title on sites such as eBay. Car dealers post cars with a salvage title and in some cases, they don't even fix them. They sell these cars at discounted prices. You can see the extent of the damage and decide if you want to fix that car yourself. You can get great deals on some of these cars.