Buying a Car with a Salvage Title

A salvage title usually indicates that a car has severe damage and isn’t roadworthy. And although these vehicles can be purchased for far below their market value, they can also be extremely difficult to insure or finance. Unless you have the mechanical knowledge to address the car’s issues, it’s best to avoid buying a car with a salvage title and instead choose an inexpensive used car with a clean title.

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What is a salvage title?

A vehicle receives a salvage title when it’s been deemed a total loss by an insurance company, often because it’s experienced such severe damage that it’s not financially worth repairing. A car may receive a salvage title after being involved in a major accident or experiencing flood damage. In many states, a car is declared a total loss if the needed repairs cost between 60% and 100% of the vehicle’s value, though the exact percentage will vary by state.

Salvage title cars are considerably cheaper than their market value — however, driving a car like this is illegal, since it’s unlikely to be roadworthy or safe. Much like buying a car without a title, it can be difficult to find companies willing to finance or insure a salvage title vehicle.

It may not always be obvious that a car has a salvage title — this is why it’s crucial to research the vehicle’s history when buying a used car. While some states require sellers to disclose that they’re selling a vehicle with a branded title, not all states do, so be sure to research the laws in your area before buying a used car.

Rebuilt title vs. salvage title

While buying a car with a salvage title isn’t a good idea, a car with a rebuilt title can be less risky. When a vehicle has been declared a total loss, a rebuilt title can be issued when the car has been restored to working condition and passes a safety inspection by a motor vehicle government agency.

Rebuilt title cars can be insured and driven, but there may still be some risk involved with buying a vehicle that has a salvage history. For example, in the case of flood-damaged cars, it can sometimes take years for significant problems to arise. If you’re unfamiliar with cars, it may be better to finance a used car with a clean title instead.

How to buy a car with a salvage title

If you’re willing to take on the risk of buying a car with a salvage history, here’s what you’ll need to know about the process:

Ask a mechanic to do a prepurchase inspection

A used car inspection could save you a lot of trouble down the road. Be sure to work with a mechanic you trust so you can understand the extent of the damage. Don’t rely on the seller to be fully transparent; in fact, the car may have issues they aren’t even aware of. In addition to the standard inspection checklist, ask the mechanic to pay extra attention to any areas directly related to the damage the car has sustained.

Research the car’s history

Any time you buy a used car, you should look into the vehicle’s background. A vehicle history report from the National Motor Vehicle Title Information System and a free VIN check can reveal the car’s history, including any title brands, previous accidents or major repairs. You can also ask the seller for repair receipts and contact the mechanic of record to learn more about the damage.

Determine when the title was issued

If the car was damaged recently, for example, that may be more problematic than a car that received a salvage title long ago but has been driven around since without issue.

Shop around for insurance and financing

This part of the process may be challenging: Many lenders and insurance providers may be unwilling to work with a car that has a salvage history. You may be able to use a personal loan to buy a car, since this type of loan offers more flexibility. In the end, however, buying a car with a salvage title isn’t the best idea, so be sure to shop around for auto loans to purchase a car with a clean title, too.

Should I buy a car with a salvage title?

Buying a car with a salvage history comes with considerable risk, both to your wallet and your safety. Here’s what you should consider before committing to the purchase:

• Safety issues: Among the top questions you should ask when buying a car is whether it’s safe to drive. In some cases, it may be risky to drive a salvage title car (plus, it’s also illegal). When you get an inspection, ask the mechanic whether the car poses a risk to you or other drivers.
• Costly repairs needed: The vehicle may need expensive repairs before it can be safely driven. Some types of damage may cause systemic problems down the line. For example, chassis damage can cause suspension, tire and steering issues.
• Inability to insure or finance: A traditional auto loan lender is unlikely to approve you for financing on a salvage-branded vehicle. You’ll also have a difficult time finding a provider that will insure your vehicle. As a result, you’ll likely have to buy the car with cash and wait to get insurance until it’s been repaired and can pass an inspection. Remember that it’s illegal to drive without insurance in every state.
• Difficult to resell: Whether it’s a dealership or a private buyer, you’ll likely have a hard time reselling a car with a salvage title. While this type of car may be cheap to buy, it also means you might not make much reselling it, especially since you can’t base the car value on price guides like Kelley Blue Book.
• Potential fraud: In some cases, a seller may lie about the extent of the damage on the vehicle they’re selling. If this is the case, your legal options may be limited and you’ll have a difficult time reselling it.

Pros and cons of buying a salvage title car

While getting a car with a salvage title has many downsides, there may still be some attractive benefits that some consumers may consider.