If you have been shopping for a used car from an auction or a dealership, you may have come across a few vehicles that have a surprisingly low cost. However, they come with something called a “salvage title.” This article will explain what a salvage title is and whether it is worth it to buy a salvaged car.
What is a Salvage Title?
A salvage title is usually given to a car that has extensive damage and has been deemed a total loss by an insurance company. Looking to recover the cost, the insurance company will often take possession of the vehicle and sell it to auto repair companies or salvage car auctions, where the vehicle is rebuilt. The next title on the car is “salvage,” that indicates to the buyer that the vehicle has been damaged.
Salvage title laws vary on a state-to-state basis, so it is advisable to be aware of them before you buy a salvage car. Most cars that are branded as “salvage” may have been damaged in the following ways:
- The vehicle sustained collision damage from an incident.
- The vehicle experienced fire damage.
- The car was stolen and parts of it went missing or were substantially damaged.
- The car experienced water-logging or flood damage.
- The vehicle was originally used as a law enforcement vehicle or heavy-duty taxi and has been re-manufactured for resale purposes.
Before you commit yourself to buy a salvage car, there are a few things you need to check:
- Check the Cost of Repairs:
The first thing to do is to request the salvage car’s insurance company to give an estimate of all the repair work done on the car. This will give you an idea of how much damage the car had sustained and will give you more power to negotiate.
- Auto Financing:
Banks usually do not give out auto financing loans to cars that are 4-5 years old, let alone a car that has a salvage title. That’s why, if you want to buy a salvage vehicle, make sure you have a strong cash reserve. Alternatively, you should also research other financing options like a personal loan to finance the purchase with better interest rates and favorable repayment deadlines.
- Investigate Lemon Laws:
Some extensively-repaired cars get a different state-sanctioned stamp of approval in the form of “lemon law” used car sales. In this case, refurbished vehicles are sold to auto manufacturers, which then sell them to auto dealerships or online car auctions. An increasing number of states have laws that protect the buyer from purchasing vehicles with impossible repair problems.
When Buying A Salvage Car Is A Good Idea
Although buying a salvage car may seem like a daunting prospect, there are some cases where they can give you value for your money.
- Cosmetic Damage:
A big accident that resulted in damage to the engine or other vital moving parts will cost a lot to repair and may not yield a reliable car. However, sometimes, a car only experiences extensive external or cosmetic damage, which may destroy the body of the car, but leave the engine and other parts relatively unharmed. These cars may be fixed by a mechanic or a DIY car hobbyist. They may be expensive to repair but the vehicles will still be in relatively good condition and may even be fixed completely. These cars are then often taken to auctions. By bidding on salvage cars online, you can get them with a big discount.
- The Right Price:
Suffering extensive damage means the price of these vehicles can decline by 30-60%, and in some cases, to even less. These vehicles can be bought from salvage car auctions at a very cheap price. In fact, you can get a lot of value from these cars. In many developing countries, car repair is much cheaper than it is in the United States. If you get your car shipped over there and fixed, it may turn out just like a relatively new one.
- Getting Spare Parts:
One of the best things a salvage car is good for is spare parts. If you repair cars as a hobby, you can dismantle a salvage car and sell its parts. These individual parts may yield more money than what you paid for the car, in some cases.
Is Buying a Salvage Car Worth It?
If you are not afraid to do extensive repairs, buying a salvage car may be a good bargain. This is particularly true if the car you have bought has only suffered cosmetic damages. A DIY hobbyist can fix that car in a fraction of the cost a car repair shop would charge.
However, it is possible you will not be able to get insurance for that car. In some cases, owners can only get liability coverage — but that is enough if you are driving a low-cost car on the road.