If a car is totaled for insurance purposes and then repaired, the title for the vehicle is designated as a salvage title. A salvage-titled car can save you a lot of money if you are looking for some inexpensive transportation, but the fact that it was damaged to the point where it was totaled can limit you in terms of your options for purchasing and insuring the car.
Sources of Salvage-Title Cars
After an insurance company declares a damaged car to be totaled for an insurance claim, the vehicle is sold to a rebuilder or salvage yard that repairs the car and returns it to running condition. State law in every state requires the car to pass a safety inspection and the title to be marked indicating that the car is a salvage vehicle. You can find salvage cars being sold directly by the rebuilder, used car dealers and on Internet car sales sites. The ad should be clearly marked that the car has a salvage title.
Expect a Low Price, and Pay Cash
You have two considerations when buying a salvage-car title. First, the price should be significantly less than the car would cost if not salvaged. You should be able to negotiate a price for 30 to 50 percent less than the blue book value of the car. There is no reason to buy a salvage-titled car unless you can achieve this level of savings. Second, you need to pay cash for the car; you're likely not going to be able to find a lender to provide financing for the purchase of a car with a salvage title. Before closing the deal on a salvage-title car, obtain a history report on the car to find out the reason the car ended up with a branded title. Not all salvage vehicles come from accidents; the car could have been totaled because it was caught in flooring or a hailstorm, or it could have been stolen and recovered after the insured was reimbursed for the loss.
Check Insurance First
Before you buy a car with a salvage title check on the availability and cost of insurance. You may not be able to get collision and comprehensive coverage, or you may have to pay a very high cost. One option is to just carry liability coverage on the car; if it is in an accident, you either pay for the repairs yourself or send the car to the junkyard. The difficulty of insuring a salvage title car should be a factor in being able to negotiate a very low price for the car.
Plan to Keep Forever
It may be next to impossible to sell a salvage title car that you have purchased. You must disclose that the vehicle has a salvage title, and that fact is likely to turn away the majority of potential buyers. Buying a salvage title vehicle makes the most sense if you plan on keeping the car as inexpensive transportation, run it until there is a mechanical failure that is too expensive to fix, and then dispose of it.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.