According to CarFax.com, millions of automobiles across the United States are found in salvage (or “junk”) condition, which means vehicles are damaged, often to the point where they cannot be repaired.
Equally often, unscrupulous car dealers and dealers resell cars, trucks and SUVs that have been registered as salvage vehicles, but do not report the vehicles as salvage vehicles.
This does not mean that all salvaged vehicles are unsalable or unreliable. It does mean, however, that vehicle buyers should know that the car they are buying has been damaged to some extent. Knowing that by entering into a car purchase transaction, a buyer can make a more informed decision and likely won’t be stuck with a lemon straying from the lot.
So what are salvage titles and how can they impact car buyers?
This is a question worth looking at. Once you’ve educated yourself about salvage titles, you can better protect yourself against purchasing a damaged vehicle from deceptive sellers.
What is a recovery title?
Salvage titles are a way for an insurance company and a government regulator to notify potential buyers that a vehicle has been damaged and its value has declined.
This damage can have happened in a variety of ways – accidents, flooding, fires, or excessive wear and tear are the most common ways a vehicle can achieve salvage status. Some states even grant a salvage title to a vehicle that may have already been stolen.
For the purposes of an automobile buyer, the term salvage is largely defined by the state in which he resides. This is because all 50 US states have their own vehicle salvage title laws (This site provides a state-by-state breakdown of the Vehicle Salvage Act.)
If there is one universal rule of thumb about state-by-state salvage title laws, it is this: a vehicle that has suffered so much damage, for whatever reason, that the cost of repair and replacement of the parts needed would be greater than 75%. value before damage to the car, truck or SUV.
When that car, truck, or SUV reaches a state’s definition of salvage status, or if a insurance company slap a “total loss” decision on the vehicle, a recovery title can then be issued on the vehicle. Once this happens, a state’s motor vehicle office will issue a salvage certificate to the vehicle, making it legally uncontrollable – and unable to be registered – in its current state.
Usually, the owner or the insured company that takes possession of the damaged vehicle and places a damage title on the vehicle can sell it to an auto garage, repair center or even a private buyer, who will rebuild the vehicle and attempt to repair it. resell itself, still with the salvage title on it.
The profit margin can be narrow in this scenario – Kelly Blue Book estimates that a salvage title can reduce the resale value of a car, truck, or SUV by up to 40%.
Benefits of purchasing a salvaged vehicle
There are some advantages to buying a car, truck or SUV with a salvage title attached:
- You will probably get it at a deal. Having a salvage title is a clear way to get a discount when buy a vehicle. If you know what you want, what’s wrong with the vehicle, and what you’re doing under the hood (or know someone who knows what they’re doing under the hood), a titled salvage vehicle can usually be bought at a big discount.
- The vehicle may not be in such bad shape. Insurance companies place a salvage title on a vehicle for a variety of reasons, including an accident, flood, or fire. One overlooked, but very real reason an insurer displays a salvage tag on a car is because the previous owner asked them to do so. This happens after claim negotiations get to a point where the owner no longer wants the vehicle and the insurer removes it as a salvage model. Insurers, on the whole, will do this willingly to avoid paying a big claim that the insured homeowner might make. In this case, the vehicle may be in better condition than a buyer thinks. This is why it is so important to know why a salvage title has been placed on a car.
- To pay quickly, you will get an even better deal. Once an insurer has a salvaged car or truck in their possession, they will likely want to get rid of it quickly. In any selling scenario, the urge for a quick sale means a sharp drop in the price of the vehicle, and it’s leverage that a buyer can take advantage of.
Disadvantages of purchasing a salvaged vehicle
There are more disadvantages than advantages to purchasing a salvage vehicle.
- Damage to a salvaged car is just too costly. Some salvage cars are more damaged than others. This is the case with a vehicle with many dilapidated issues, such as a damaged frame or a cracked engine block. Even a skilled vehicle machinist can struggle to make a profit given the work that must be put into so many excessively damaged salvage vehicles.
- The recovery label does not disappear. Like a bad reputation, a salvage title is forever. Once an insurance company puts a salvage title on a vehicle, it is there for the long haul. This means that even if you devote 100 hours to repairing the vehicle and getting it back to good driving and performance condition, it will still be registered by the insurance company and the state as a salvage vehicle.
- Its resale value is low. Just like you bought a salvage car at a discount, it will probably have to be sold at a discount if you ever want to get rid of the vehicle. Worse yet, when you buy a salvaged vehicle, you may have a hard time getting the car insured by a reputable insurance company. You can get partial coverage, but don’t expect to get 100% insurance coverage on a vehicle that an insurer likely considers junk.
- You will have difficulty obtaining an auto loan. Banks and auto lenders are reluctant to finance a vehicle with a salvage title attached. After all, a damaged vehicle is a damaged vehicle, and you don’t want to pour financing money into a car or truck that might not go another hundred miles before it completely collapses. Longevity is paramount for an auto lender and unfortunately salvage cars do not fare well in this category.
Take-out food on recovery title vehicles
If you buy a salvaged vehicle with the intention of rebuilding, repairing, and reselling it, don’t try to hide the fact that it is in fact a vehicle with a salvage title.
From a law enforcement perspective, protecting a salvage title from a car for sale is illegal. Also, the buyer is required to know this anyway when trying to insure the vehicle, inspecting the title, or accessing a vehicle history report.
Be upfront about a salvaged vehicle and you will likely have a cleaner, more honest car sales experience.
