Should you buy a car with a salvage title? – Forbes Advisor
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A car with a salvage title has suffered major damage (such as in an accident or flood), which usually means you can buy it for much less than its market value. However, while saving money on a used car is great, you might want to think twice about buying a car with a salvage title.
Here’s what you need to know about buying a car with a salvage title.
What is a salvage title?
A salvage title is awarded to a vehicle whose extensive damage and cost of repairs hover around or exceed the actual value of the vehicle. This type of title is a type of “trademark title”, which indicates that the vehicle has suffered damage of which the owner and the potential buyer should be aware. A branded title can also be marked as “rebuilt”, meaning the salvaged car has been rebuilt and qualified for registration and registration after passing an inspection.
It’s not always obvious whether a car has been damaged, which is why many states require the seller of a car with a salvage title to disclose this information. However, not all states have these laws, so it’s important to familiarize yourself with your state’s requirements before you go car shopping.
Also keep in mind that the requirements for obtaining a salvage title may vary from state to state. For example, in New York and many other states, a vehicle’s title will qualify as salvage if the total repair costs amount to 75% or more of the market value of the car. But some states like Florida will issue a salvage title if the vehicle is deemed a total loss by the insurance company.
How to buy a car with a salvage title
If you decide to buy a car with a salvage title, follow these four steps:
- Get a full inspection. Before buying a car with a salvage title, be sure to have it inspected by a mechanic you trust. Do not rely solely on the owner’s description of the current condition of the vehicle. This way you will know what kind of damage you might face if you buy the car.
- Check the car’s history. Double-check what led to the vehicle being issued a salvage title. You can visit the National Motor Vehicle Title Information System (NMVTIS) to get a car history report from one of its data providers. Also be sure to ask the seller for receipts and estimates for repairs, or contact the body shop that performed the work.
- See when the salvage title was issued. A car that received a salvage title years ago but has been driven reliably since is generally a safer bet than one that has been damaged more recently.
- Consider your financing options. Lenders generally consider cars with salvage titles to be very risky investments, which could make it difficult to get a loan for this type of vehicle. You may find it easier to get a loan for a salvage car if you have a good relationship with your bank or credit union and your credit is good to excellent. Or you could consider taking out an unsecured personal loan.
Should I buy a salvage car?
Generally, no, these types of vehicles carry several major risks that you should not ignore. But in some cases, buying a salvage car might make sense, although you should delve into the vehicle’s history first to see if it’s really a bargain or not.
For example, let’s say you’re interested in a car that has a clean history with two previous owners, no accidents, and complete maintenance records. But after the second exchange, it was exposed to a hailstorm on the dealer’s lot and was declared a total loss, although it suffered no damage under the hood or inside. If you can live with the knocks on the body of the car and maybe get some repaired, you might have found a great deal to save some money.
Or let’s say a vehicle that was stolen, reported stolen to the police, and recovered within 24 hours before all parts were stripped. Although the vehicle will likely be issued a salvage title by the state due to the theft, it could still be worth buying as the car suffered no damage.
But outside of these unusual circumstances, it’s probably best to consider other used cars with clean titles to avoid risk.
Advantages and disadvantages of buying a salvage car
If you’re considering buying a car with a salvage title, there are pros and cons to consider.
Benefits of buying a salvage car
- You can save money. You can usually buy a car with salvage titles for 20% to 40% less than market value compared to a vehicle with a clean title.
- You might find a car with little damage. A salvage title does not always mean the car was wrecked. For example, you might find a heavily discounted salvage vehicle that was stolen and salvaged before being stripped down for parts or only suffered minor cosmetic damage. Even if the car needs some minor repairs, it could cost you a lot less to fix than what you would have spent on another vehicle.
- The vehicle could be used for parts. If you’re restoring a vehicle that needs expensive, hard-to-find parts, buying a car with a salvage title with the parts you need might be worth it. Or you could decide to repair the salvage car yourself.
Disadvantages of buying a salvage car
- The car could have significant damage or be unsafe. It can be hard to judge the extent of the damage you’re sustaining just by looking at a car, which means you could end up having to spend a lot more on repairs than originally planned. There have also been reports of lawsuits involving auto repair shops that cut corners on vehicle safety.
- A risk of fraud. Unfortunately, sellers don’t always tell the truth about the damage that led to a salvage title. If you buy the car and it needs major repairs, you will have little recourse.
- It is difficult to qualify for insurance or financing. Insurance companies usually provide limited coverage for salvage cars and sometimes provide no coverage at all. It can also be difficult to find a bank or credit union willing to offer a loan for a car with a salvage title.
Can you get insurance on a car with a salvage title?
Since a car with a salvage title is not considered roadworthy, you generally won’t be able to get insurance unless the vehicle is rebuilt and passes safety inspections. But even then, many car insurance companies do not cover cars with rebuilt titles.
If a company offers insurance for this type of car, it is usually only liability coverage and will not cover the cost of damage to the recovery vehicle in the event of an accident.
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Although buying a car with a salvage title can save you money, it comes with several risks that could far outweigh the benefits. If you are considering buying a salvage vehicle, be sure to do your research to understand exactly why the car has a salvage title and what repairs it will need to have to be considered safe and roadworthy.