A salvage title is given to a vehicle that has been previously damaged beyond repair. Insurance companies declare a vehicle as “total loss compensation” if the repair costs exceed the market value of the vehicle. Salvage vehicles can be resold, but it can be difficult to get insurance and financing. Buyers should research why the vehicle has a salvage title and consult their state’s department of motor vehicles. Sellers must inform buyers of the salvage title and associated risks.
A salvage title is a different designation a state applies to a vehicle when it has been previously damaged. The state requires the vehicle owner to allow the state Department of Motor Vehicles to add an official “salvage” disclaimer to the vehicle title. Buyers or others can look at the title and see that the vehicle has been previously damaged.
A salvage title, also called a “junk title,” applies to a vehicle when it has been destroyed or otherwise damaged beyond the cost of a reasonable repair. Insurance companies often declare a vehicle as “total loss compensation” where the repair costs exceed the market value of the vehicle. The insurance company weighs the vehicle’s pre-accident market value against the repair costs. If the repairs cost more than the car’s value, it’s not in the insurance company’s interest to pay for the repairs. The company will declare the vehicle lost and write a check for its value.
Due to the high market costs of repairing different types of car damage, including bodywork or cosmetic damage, it is easy for a vehicle to be declared a total loss and yet still be a functioning vehicle. When this happens, a salvage vehicle can be resold, provided the buyer is notified of the salvage status. It can be difficult to get auto insurance for a car or other vehicle with a salvage title. Financing and other aspects of sale and use can also be problematic, which is why many auto experts advise against buying a salvage title vehicle.
Wrecks aren’t the only reason a vehicle can carry a salvage title. Fire and flooding can also cause damage to a vehicle which will make it a total loss to an insurance company. Salvage vehicle buyers should do research to understand exactly why the vehicle carries a salvage title. However, for the right buyer, who may want the car for spares or to drive on private property, a salvage car can be a great deal.
In addition to the additional steps required to purchase a salvage title vehicle, a state may have its own laws about registering a previously damaged car or truck. Buyers are encouraged to consult their state department of motor vehicles before becoming involved in the sale of vehicles with salvage titles. Sellers must inform the buyer that a specific vehicle has a salvage title and explain some of the risks involved in purchasing this vehicle for personal transportation.
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