How Much Does Salvage Title Reduce Value?

When hunting for a used vehicle, chances are you will come across what initially appears as a bargain deal: a car that runs well, with low mileage, is in good cosmetic condition, and is selling well below market value.

Salvage title vehicles often fall into this category. They are usually priced at 90% to 95% of the average market value for any model. So, it could be a bargain of a lifetime. Still, it is critically important to be aware of the potential pitfalls.

Definition Of Salvage Title

A salvage title is a certificate issued to a vehicle written off as a total loss by the original insurance company. This is determined by estimating the repair cost to be higher than the actual value of the vehicle, and the insurers will declare the loss and take possession of the car.

Overview Of How Salvage Title Affects Vehicles

Once the vehicle has been deemed a total loss, the insurance company will immediately issue the salvage titles certificate, which means that the vehicle is declared unroadworthy and can’t be legally driven on public roads.

The vehicle can only be sold, registered, or driven once it has been assessed and rebuilt. Usually, the vehicle first goes on auction, attended by salvage yards and auto repair companies.

Once the car, SUV, or truck is rebuilt and repaired, it receives the salvage titles, which makes future potential buyers aware of the vehicle’s history.

Factors That Affect The Value Of Salvage Title Vehicles

Every state in the United States has laws determining the factors that constitute a salvage title. The damage can include accidental fire, flooding or theft, and parts damage.

Age And Condition Of Vehicle

Whether a vehicle is classified as a clean title, salvage title, or a rebuilt title, the vehicle’s age and condition will always, naturally, impact the value of the vehicle and, thus, the selling price.

Age and, therefore, depreciation is a factor that severely impacts the vehicle’s value. They are regarded as depreciating assets, meaning they lose value over time. The typical depreciation rate ranges between 15% and 30% a year, and a new car will halve in value within 5 years.

Type Of Salvage Title

In the United States, salvage titles fall into two broad categories.

• A Repairable title is attached to a vehicle deemed a total loss, yet it is repairable. This type of salvage titles requires one or more sub-brands of damage, called legends.
• Parts only is a title declaration for a vehicle that’s beyond repair. It doesn’t need any sub-brand and is regarded as a total loss. This vehicle can’t be registered or retitled and cannot be legally sold and driven on public roads.

Local Market Conditions

As with the new and secondhand market in roadworthy vehicles, local market conditions also affect the value of salvage title vehicles. The price of salvage title vehicles will fluctuate when new car prices rise steeply due to inflationary pressures and vice versa.

Understanding the Value of Salvage Title Vehicles

It’s important to understand that a salvage title vehicle will hold its value based on what the intended buyer wants the vehicle for. It could be repaired and retitled or chopped up to use for parts.

Comparing Value To Other Vehicles

If you are selling, the salvage value, compared to other vehicles, will usually reflect the difference in the value of the vehicles being compared in both the new and used car market. This said, obvious factors such as the age and condition of the vehicles also affect the vehicle’s value.

Market demand for your specific vehicle make and model is also a consideration. Popular vehicles in the formal new and used market also impact the salvage titles market.

In the end, it’s the insurance companies that determine what the salvage titles value should be, and this will be the best guideline.

Pros And Cons Of Purchasing A Salvage Title Vehicle

We live in uncertain times, which is reflected in the cost-of-living crisis that has been exaggerated by global socio-economic and political events. So, it’s no wonder most potential car buyers are looking more intently for the best deal possible.

When considering a salvage title vehicle purchase, all sorts of red flags will be raised, warning against this.

Although financially written off, not all salvage titles vehicles may be repairable and worth considering.

Minor categories of a salvage titles, including theft or disaster recovery, may well mean that the vehicle is worth repairing and can be mechanically and cosmetically restored to its former glory.

But, of course, one needs to approach with caution, and it’s essential to look at the pros and cons before deciding to purchase.

Pros of purchasing a salvage title vehicle:

• The attractive lower price is a significant benefit of opting for a salvage title vehicle. You would be looking at around 75% of the value of a clean title equivalent. Usually, even less and almost certainly no more.
• Excellent value for money where an insurance company has replaced a stolen vehicle that has since been recovered or because they write off a good condition car where the damage is not actually worthy of a salvage title.
• Vehicle parts are costly and sometimes difficult to find, particularly for older cars. So auto body workshops are always on the prowl for quality spare parts. They can fetch a hefty reward, and there will usually be plenty of takers.
• Repairing and selling a salvage title vehicle for profit is a good deal for those with the skills or contacts to do this. Particularly if the repairer can make it roadworthy again and sell it at the vehicle’s used market value.

Cons of purchasing a salvage title vehicle:

Of course, it’s not all roses and sunshine. Some horror stories exist where salvage titles vehicle purchases have gone horribly wrong.

Therefore, caution is advised, and its always a good idea to consider the potential cons of purchasing a salvage title vehicle:

• In the case of a vehicle involved in a collision, it is risky to assume that all the damage is visible to the naked eye. Therefore, it is worth taking an expert to check for any hidden damage you may miss.
• Insurance companies are hesitant to cover vehicles with salvage titles. You may also have a problem if you get involved in an accident and the insurance assessor identifies existing issues. Then, the insurers may refuse to pay out.
• Insurance companies may also hike up your monthly premiums to compensate for the additional risk, and most will only pay a maximum of 80% of the claim. So shop around for the best possible deal.
• Salvage title vehicles that have been restored are not rebranded as clean title. The Department of Motor Vehicles will issue a rebuilt title for cars approved for road use. This means that you will likely struggle to sell the vehicle later.

Conclusion

Different state laws and insurance company policies affect salvage title conditions, yet the process follows the same basic guidelines. First, a vehicle that has incurred enough damage to warrant a total loss is written off. Then, the insurance company will appropriate the vehicle and issue a salvage title certificate.

The vehicle is then sold, usually to rebuild or for parts. If the vehicle is repaired, it can be sold and bought with a rebuilt title. However, even if it is in perfect condition, the vehicle cannot receive a clean title, warning future owners of the damage history.

A helpful link for any buyer to check a car’s title history is Autocheck.