A car becomes designated as “salvage car” when the insurer of the vehicle determines that the cost of repair is greater than a significant the market value of the car. Typically, some sort of damage will occur, the car owner will file a claim, and the insurance company will take possession of the car when their repair estimate exceeds their threshold. This threshold varies by state and country, but it can run anywhere from 70% to 100% of the car’s market value. The insurance company will sell their vehicle to a salvage lot or auto auction at severely reduced prices.
From here the car becomes salvage. Because the determining factor for a salvage car was portion of value instead of a set repair cost or damage assessment, there are a huge variety of reasons that a car will become salvaged. Many times, salvage cars will only have superficial or easily-repaired problems that the insurance company simply didn’t want to deal with.
For instance, a low-cost vehicle such as a 1996 Ford Escort would only have to have a thousand or so dollars of necessary repairs for an insurer to declare the car totaled and become a salvage car. Likewise, an expensive car such as a Salvage BMW M3 could have cosmetic body damage that would normally cost an exorbitant amount to repair if official BMW parts were used.
The car would be declared totaled, yet someone could repair it using aftermarket parts or salvage yard parts for much less than the insurer’s official estimate. In both of these examples, a simple bureaucratic decision results in a good deal for the buyer.
According to some states, cars don’t even have to incur damage to be salvaged. A vehicle could be stolen and replaced by an insurer after thirty days, but then later recovered and declared totaled because it was already accounted for, even if there is absolutely no damage to speak of.