A salvage title is a branded title that warns buyers of the extent of damages from an accident, theft, or other situation like a natural disaster.
What is a salvage title?
A salvage title is a branded title that describes a car that has been deemed a total loss by an insurance company.
When a vehicle is involved in a loss, what happens next is carefully dictated by state laws, which vary from state to state. Generally, the damaged car is assessed by your insurer or the body shop to determine the extent of the damage. A preliminary estimate is usually written for any car where there is a possibility that the cost to replace the vehicle is greater than the cost to repair—if that’s the case, it’s what’s known as a “total loss.” (Many states set limits, or “thresholds”, on how much can be spent to repair a vehicle before it is deemed a total loss.)
In some cases, rather than scrapping the car or letting it go to the junkyard for parts, the owner decides to hold onto the vehicle—perhaps to fix it up themselves. In this case that car would have a salvage title.
Why would a car have a branded title?
A standard salvage title isn’t the only branded title that states issue to motor vehicles. If a car was flooded during a hurricane or flash flooding, or stolen and not recovered for more than 30 days, or involved in any other number of insurance scenarios, it may also be issued a branded title. The branded title might be a straightforward salvage title — or it might be branded for flood damage, lemon law buyback, or other scenarios.
In some states, what’s known as a rebuilt salvage title will be issued by a state’s Department of Motor Vehicles (the DMV) after a car with a salvage title is rebuilt and then inspected by a state facility. Until that inspection is completed and a rebuilt title is issued, the salvage vehicle may not be allowed to operate on roadways in some states.
Should a car with a rebuilt or salvage title be avoided?
Buying a used car with a salvage title can definitely be tempting. Oftentimes, these used cars are available for sale at reduced prices, look nice, drive well, and even pass basic inspections. All this combined may make it seem like a no-brainer if you’re on a budget and looking for a solid car below market value for a similar model.
However, there are some big downsides to buying a salvage vehicle that you might not be expecting.
Hard to insure: Many insurance companies do not insure damaged vehicles with a branded title, even if they have been rebuilt and passed the Department of Motor Vehicles’ inspections. If the car insurance company does insure it you’ll likely have a higher price, and if you total the car, the value will likely be much lower than you expect.
Hard to get a loan: Banks aren’t too eager to loan out money where a salvage car is collateral. That’s because the car likely has hidden problems and is really hard to put a true value on. You may be able to get a personal loan without collateral if you have a good credit score, but interest rates are usually higher.
The car might have major problems: Even if the car looks spectacular and drives well, it may have hidden problems. For example, the bodywork might be in great shape, but blown airbags or other electrical parts might not be properly repaired or replaced. These problems can require repairs and those costs can add up very quickly.
Low resale value: You will probably get a deal on your salvage title vehicle, but that means the resale value will also be low, perhaps lower than you expect. If you do go to sell it, you may find yourself with a car that isn’t worth much to buyers.
Trade In: If you go to trade in a salvage title car, you may find that most dealerships won’t make an offer on the rebuilt vehicle, or take the car in on trade.
How do I know if a used car has a salvage title?
Given the problems and drawbacks that come with a car with a salvage title, you might not be comfortable owning one. While there are ways that unsavory dealers and people can “wash” a salvage title, most of the time determining if a car has a branded title is straightforward.
There are three ways to confirm if a car has a clean title:
- If you are buying a car from a private party, be sure to inspect the title of the car. In many cases, you’ll find the brand right on the title. It may say ‘salvage’ or one of the other brands used in your state.
- Using the vehicle identification number (also known as a VIN) you can use the free service offered by the National Insurance Crime Bureau, or some state systems, to get information about title brands.
- You can also pay a fee to sites like Carfax, which give you a vehicle history report — including the number of prior owners, title branding, accidents, and so forth. The National Motor Vehicle Title Information System also provides title information for a fee.
If you do want to go ahead and buy a car with a salvage title, be sure to get the car thoroughly inspected, and be aware of the risks involved. Lastly, be sure your insurer will allow you to purchase car insurance (at Lemonade, we do not).