What is a salvage title car you may ask? A salvage title is given to a car when an insurance company decides it is beyond repair. The car is not worth what it would cost to fix it. This is sometimes also referred to as a vehicle that’s been “totaled.” The cost of repair would exceed its actual cash value (ACV).
- What’s the salvage title meaning for salvage title cars?
- What other title brands should you watch out for?
- How does an insurance company determine if a car is a total loss?
- What’s salvage title insurance?
- Are salvage title cars bad?
- Are salvage title cars worth it?
The salvage title meaning for salvage title cars means the car has been in a wreck, fire, or flood. An insurance company then considered it a total loss and bought the car from the owner.
A salvage title is a type or “brand” of title. There are several different other brands that buyers should know about when shopping for cars, which we mention below. Title brands were created to protect consumers and to make things harder on car thieves.
Even if an insurance company has totaled a car, criminals dealing in stolen cars could switch the car’s vehicle identification number (VIN) and registration from the damaged car to a stolen car to cover their tracks. When a car is totaled and the title shows that fact, it becomes harder to make the switch.
Changing the title’s brand also helps protect the buyer from buying a car that has been in a collision or otherwise totaled. Knowing some things about what is a salvage title can protect you from buying a car with a shady past from a car dealer’s lot or at a car auction.
When trying to understand exactly what is a salvage title you should know that having a salvage title is not good news for a buyer or the seller.
Different states have different laws regarding what happens to a vehicle that has been totaled, but in most cases the insurance company becomes the owner of the vehicle.
The insurance company pays off the owner of the car – assuming it has collision or GAP insurance on it. The pay-off is usually what the car was worth before the accident, fire, or flood. This number is figured out by looking up how much the car is worth using the Kelley Blue Book.
If the owner of the car wants to keep the wrecked car, the insurance company will deduct the value of the salvage. The owner gets less money but keeps the salvage vehicle.
Keep in mind that the car has still been in a wreck and that information is usually shared with services like CARFAX but the title of the car doesn’t change. See our article, CARFAX vs. AutoCheck: 10 Steps Before Buying a Used Car for more detail.
The insurance company removes the license plates from the totaled vehicle and sends a certificate of ownership to the local Department of Motor Vehicles (DMV). The DMV then issues the insurance company a salvage title.
Some of the other title brands to watch out for are listed below. Take a look:
- Clear Title: This type of title means that the car has never been in a major accident. But keep in mind that even vehicles with a clear title can be flawed if it was in a wreck that was not reported to the insurance agency or if the accident happened in an area where the law about reporting collisions didn’t require it to be reported.
- Rebuilt: Some cars that were once branded as salvage get rebuilt and/or repaired. These rebuilt vehicles may look and run fine but if they are re-sold across state lines they may need an inspection.
- Irreparable: This brand is usually given to vehicles that have been in fires and floods. As the name states, they are beyond repair.
- Lemon: Most states have lemon laws that allow a buyer to return cars that need a lot repairs due to factory defects. The laws about what’s considered to be a lemon vary quite a bit but safety is a big factor. Avoid any title that mentions lemons or lemon laws.
- Odometer Rollback: The car’s odometer records the mileage on a car. Because the odometer helps show what a car is worth, it’s illegal to change a reading by moving the numbers backwards.If there is a proof that a car’s odometer has been rolled back, the car will be tagged with an odometer rollback branded title.
- Water Damage: Cars that have been in floods face a number of potential problems including mold, mildew, electrical, and mechanical problems.Even if floods are not an issue in your part of the country keep in mind that flood-damaged vehicles often get sold at auctions or to other dealers. If the car’s flood history was recorded it may have a water damage title.
- Hail Damage: Twenty states and the District of Columbia have a title brand for hail damage. Although hail rarely appears in certain parts of the country it causes over a billion dollars in property damage per year.A visual inspection and a look-over from a mechanic are good ideas for avoiding cars with hail damage branded titles.
When deciding if a car is totaled there are gray areas while trying to understand what is a salvage title and whether you should buy a car that has one.
For example, if a car worth $4,000 gets in a crash that will take $3,000 to fix – a number that’s less than what the car was worth, it still may be considered totaled by the insurance company.
Figuring out if a car is totaled can vary from state to state. Insurance companies use the formula below.
Total Loss Formula:
Cost of Repair + Salvage Value > Actual Cash Value (ACV)
If you are trying to decide whether to buy a car with a salvage title or trying to understand what is a salvage title, take a tip from us. It’s best to be cautious and don’t expose yourself or your money to the risk.
Salvage title insurance is a policy that covers a vehicle that has a salvage title. An insurance company gives out a salvage title after the vehicle has been totaled, a claim has been paid to the car owner and the tags from the car have been turned in.
As you come to grips with what is a salvage title and whether you should consider buying a car with one, think about how you will insure the vehicle.
Some companies may not offer insurance for a car with a salvage title. Companies work differently and laws vary. Be prepared to answer some key questions. You may also have to jump through some hoops if you’re trying to get insurance for a salvage title vehicle.
For instance, in California to get a car with a salvage title registered, titled, and insured you will need to fill out an application that includes the cost of all repairs, proof of ownership, a vehicle inspection by the California Highway Patrol, and a California brake and light inspection certificate.
Cars with salvage titles are not all bad but they have been in a major wreck, fire, or flood. They have been totaled by the insurance company. If you’re trying to figure out what a salvage title is and if they are bad investments, be careful.
Insurance companies follow different rules in different states using different sets of numbers to figure out how much a car is worth. Because of that, some cars that are still good may be totaled. These good cars with salvage titles are the exception rather than the rule.
You could buy one of these vehicles and come out okay but you are betting against insurance companies who have decided that the salvage vehicle is not worth fixing.
Salvage title cars may seem like good deals, but probably are not worth it. If you’re trying to save money on you next car you are better off browsing AutoGravity’s inventory of used cars from high-quality dealers.
Dealing with the challenges of understanding what is a salvage title and trying to decide if you should buy a car that has one is high risk. You would be better off putting your hard-earned dollars into a car with a clear title. Be smart and avoid cars with salvage titles.
Buying a used car and hoping to get one in its original condition is probably too much to hope for. When you’re in the market, do your homework on any salvage vehicle including a motorcycle.
Examine the title carefully, get the car inspected, and consider the number of years on the vehicle. Look for any problems and check out the prior owners. Double check the documents before you agree on the price and complete the sale. When asking about what is a salvage title, it’s best to be informed and don’t buy a car that has one.