Can I Finance a Salvage Title Car?

A son in the driver’s seat laughs at his father who is under the hood of the salvage car they are rebuilding

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You’re walking through the back of your local used car lot looking for a new set of wheels when you see it: a beautiful car with an even prettier price tag. In fact, the price seems almost too-good-to-be-true. When you ask the dealer about the car, he extols its value and virtues—and mentions that the price is so low because the car is a salvage title vehicle.

For those of you who don’t know, a salvage title car is one that has been in an accident or damaged in some other way, where the damage is so significant that the insurance company has written it off as not worth the cost of repair. The car’s title is then “branded” as salvage, and, in many cases, the vehicle is sent off to auto heaven (also known as the junkyard). Sometimes, however, salvage title vehicles are put up for sale to be purchased by car enthusiasts who buy them for the parts or who think they can fix them up for good, cheap transportation or to resell once they have been repaired.

If you are considering the purchase of a salvage title vehicle, tread carefully, as there are many issues to consider. One of the first is how to pay for it. If you don’t have the ready cash, then we come to the question at hand: “Can I finance a salvage title car?”

The short answer is no. But there may be an exception if what you're looking at is a "rebuilt title car."

Salvage title cars have not been repaired and are not considered road-worthy. However, these vehicles are sometimes restored and come out the other end in safe running condition. At this point, they become a rebuilt title car. When it comes to financing, there’s a huge difference between a salvage title car and a rebuilt one. And the difference has everything to do with answering our question.

A Real Salvage Title Car

In the case of an honest-to-goodness salvage title vehicle, finding reasonable financing is going to be difficult, if not impossible. The truth is that most banks may look at a salvage title as coming with very high risk. And who can blame them? The vehicle was written off as a total loss by the insurance company for a reason. If one responsible company with a financial stake in the vehicle has already decided it is not worth investing in, the chances are that another one will, too.

When it comes to financing a salvaged car that has not been rebuilt, you may be out of luck with traditional lenders, though perhaps some of your relatives or friends may be willing to take a chance and loan you the needed funds. But before you do so, you should carefully consider whether or not you’re willing to shoulder the responsibilities. You will need to substantially repair the vehicle before you’re allowed to take it on the road, and you’ll also need to subject it to an inspection before it can be reclassified as a “rebuilt” car.

A Former Salvage Title That Is Now a Rebuilt Car

Finding a reasonable loan to buy a rebuilt vehicle is still going to be difficult. Still, it will probably be a lot easier than finding financing for a car with a salvage title, which is nearly impossible to do. The key is proving to the lender that the car has been thoroughly rehabilitated and is in excellent—and safe—running condition.

You can do this by hiring a competent, independent, certified mechanic to inspect the vehicle and write you a clean bill of health. Ask the owner first, though—he has probably already done this himself. In fact, it is likely the first thing he showed you when you came to look at the vehicle. Come to think of it. If he doesn’t have one, you may want to consider turning around and getting out of there as quickly as possible: it’s probably not worth the risk you’re taking.

Looking for Loans in all the Right Places

If you absolutely must have that salvage title car and you are determined to find a lender, then go for it. Here are a few tips to help you with your search.

Where to Go

When it comes to banking, nothing beats a good relationship—and a great credit score. Start by speaking with the lenders you currently have, or formerly had, an auto loan with, if you have a good track record with them. It is particularly helpful if you can deal face-to-face with an agent you know personally.

If that doesn’t work, a quick search online should bring up several second-tier—or third-tier—lenders who claim to finance salvage title cars. Whoever you find to write a loan, however, be prepared to pay a potentially high-interest rate. A salvage title vehicle may be a risky investment for anyone. You can be sure that any financial institution worth its weight will not be eager to encourage people to buy such a vehicle by offering a low-interest rate.

What to Bring

In deciding whether to write a loan or not, lenders are going to assess their risk level. So it is to your advantage to bring with you everything you have that will help convince them that you are a low-risk borrower. The two most important pieces of evidence in your favor are going to be a mechanic’s statement and your good credit rating. It wouldn’t hurt to show evidence that you have a clean driving record as well.

You should probably also bring along a statement from your insurance carrier, indicating that they are willing to insure the vehicle (a rebuilt car, not a salvaged car before it has been repaired). If you have been able to convince an insurer to write you a policy on the car, then you probably have a good chance that a lender will also be willing to write you a loan for it. And frankly, if you can’t get an insurer to write you a policy, why would you buy that car in the first place?

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