“I just found out my car has a salvage title. What should I do?”
So, your car suffered extensive damage—perhaps from an accident, fire, or flood—and is now considered a total loss by your insurance company. What happens next?
In this post, we explain everything you need to know about salvage titles, what to do next once you find your car has been assigned a salvage title, and how to make sure your car runs well despite its title.
What Does a Salvage Title Mean?
What exactly does a salvage title mean? A salvage title is when a vehicle has been damaged to the point where the cost of repairing it is a lot higher than what it’s actually worth.
When this happens, the insurance company that paid a claim for the vehicle’s value will declare a total loss. In most states, the next title of the damaged car that has been repaired is what’s referred to as a salvage title. Salvage titles let future potential buyers know the vehicle has been severely damaged before.
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Different Categories of Salvage Titles
Categories of salvage titles differ from state to state. Some states, however, have two common categories: repairable and parts-only.
Although declared a total loss, repairable vehicles—as the name suggests—can still be repaired. Repairable cars require at least one sub-brand of damage.
Parts-only is when a vehicle has been declared a total loss and completely unrepairable. It doesn’t need a sub-brand and can never be re-titled or registered in other states.
Research Your State Laws
Rules and Regulations for Salvage Titles
After your car has been declared a total loss by your insurance company, you will need to obtain a branded title to designate your car as salvaged from the Department of Motor Vehicles (DMV) of your state. The title will be issued to your auto insurance company so the vehicle can be hauled away and auctioned off for parts.
If the salvage value is higher than the settlement offered by your insurance provider, you may opt to keep your car even if you don’t plan to repair or dispose of it yet. Again, this depends on the state where you live.
If you decide to sell it, the new vehicle owner may receive the salvage title as proof of ownership. Prior to purchase, they can also inspect the vehicle and verify the VIN (Vehicle Identification Number) to review the car’s history report.
VIN checking and vehicle history report is done by the National Insurance Crime Bureau (NCIB), Carfax, Kelley Blue Book, or the National Motor Vehicle Title Information System.
As we’ve mentioned, the rules on salvage titles may change depending on your state. For more accuracy on rules and regulations, it’s best to check the jurisdiction for the specific state you’re in.
Purchasing insurance for a car with a salvage title isn’t easy, but can still be done. Most states require vehicle inspection and the following requirements:
- Complete and thorough mechanical inspection;
- Current photos of that show multiple angles and views of the vehicle;
- Onsite physical damage inspection by an insurance representative;
- Approval of the Department of Motor Vehicles (depending on your state)
Calculate the Value of Your Vehicle
Find Out the Fair Market Value
You can use industry resources to calculate the fair market value of your vehicle. Combine the vehicle’s retail and wholesale values and divide them into two like this:
Retail Value + Wholesale Value / 2 = Fair Market Value
Then, find out what percentage of the market value your insurance provider uses to determine its salvage value. In general, however, it’s usually 75% of the fair market value.
Once you’re done, subtract the percentage as a decimal from 1.0. For instance, if 75% loss of market value is what’s considered as salvage, then, 1.00 – .75 = .25. Multiply the fair market value by the resulting decimal.
So for instance, if the market value is $10,000, multiply it by .25. The result, which is $2,500, is the salvage value.
Get an Accurate Estimate
It’s best to contact your insurance provider to get an accurate estimate of the value of your vehicle. They will also assess the projected cost to provide your vehicle with insurance coverage.
Contact Your Insurance Provider
Consider Other Coverage Options
It might be difficult to get comprehensive insurance coverage for vehicles with a salvage title. But depending on the insurer, you can typically get other coverage options such as liability coverage, uninsured motorist coverage, personal injury protection, or medical payments coverage.
File a Claim
Filing claims from your insurance provider involves several steps:
- Contact your insurance provider either through phone, mobile app, website, or physically visit their office;
- Schedule an inspection with the insurance adjuster;
- Review the quote submitted by the insurance adjuster;
- If you’re amenable to the quote, remove your personal belonging from the car and release the car to your insurance provider;
- Receive the settlement amount by check, wire transfer, or through the agreed mode.
Decide Whether You Want to Repair or Sell
But what if you are not amenable to your insurance provider’s quote? You have two other options: you can have your car repaired or you can sell it.
Cost of Repairs
How much does it cost to fix a salvaged car? There’s no straight answer to this question because it depends on the level of damage your car has suffered.
On average, however, repairs could be between $2,000 and $6,000. It could go higher to have it fully repaired and running in the best condition.
You can also sell a salvage-title car provided the buyer knows the vehicle has a salvage title. You can sell it to a junkyard, or list it online so private buyers can make an offer.
However, make sure to get the important paperwork—in this case, the car title and registration—ready before selling it.
You can also sell your car for parts. This means stripping down your car to sell the parts either individually or collectively. It’s a tedious process on your end, but you’ll likely end up getting more money if you go down this option.
Start the Registration Process
Obtaining a New Title
Your vehicle can be issued a branded title and registration once it has been rebuilt and has met specific requirements.
In general, inspectors need to verify all the major component parts of the car such as the engine, front-end assembly, rear-end assembly, and transmission. These parts must be in good working order and the car must have all the required equipment for highway use in order to pass the inspection.
To register a salvaged vehicle, you will need:
- Completed Application for Title or Registration form signed by the current owner;
- Proof of ownership;
- Completed Verification of Vehicle form;
- Completed Vehicle Transfer and Reassignment form;
- Completed Statement of Facts form;
- Brake and light adjustment certificates;
- Smog certification;
- Existing license plates;
- Weight certificate (if your vehicle is a truck or pickup);
Again, the exact documents you need to register a salvaged vehicle depend on your specific state.
Know the Risks of Buying a Vehicle With a Salvage Title
What if you’re planning to buy a car with a salvage title instead of selling one? What are the things you should know about?
Safety is the main concern when buying salvage title cars. A car’s exterior may look okay, but if it has previously suffered a collision, it will likely have a compromised structure that won’t help protect you in case you get into an accident yourself.
That’s because the structure of the metal used in modern cars bends to absorb the force of an impact. Once bent, it can’t be reused or bent back into position.
Increased Risk of Breakdown
In order to make salvaged cars sellable and profitable, the shops that rebuild this type of vehicle use cheap and low-quality parts. Because of this, salvaged cars tend to break down easily which makes them more expensive to maintain.
They may also have hidden issues that only become obvious after several months of use. On top of that, salvaged cars are also more expensive to insure.
Lower Resale Value
If you buy a salvaged car and then decide to sell it later, it will also have a low resale value—perhaps, 20 to 30 percent less compared to a car with a clean title. No matter how much you revamp a salvaged vehicle, its label will not go away and will be a cause of concern (and a point for more haggling) for buyers.
It’s important to know the risks of buying and selling a vehicle with a salvage title so you know what you’re getting into. If you unknowingly purchased a salvage-titled car, get legal help or contact the Consumer Protection Office of your state.