How Does a Car Become Salvage?
Before you purchase a salvage title vehicle, you need to know what you're getting yourself into.
Salvage title vehicles always come with a lot of questions. Most vehicles won’t ever become a salvage vehicle. The most common way a vehicle becomes salvage is by being involved in a major accident or natural disaster. But in some states, a vehicle can also become a salvage title if it was stolen and never recovered by the police. All of these reasons should raise red flags, and you should proceed with caution. Learn more about what's considered a salvage car.
In many cases, you are much better off avoiding buying a salvage title vehicle—they can be more trouble than they're worth.
If a vehicle is involved in an accident and is declared a total loss by the insurance company, but the owner decides to keep it anyway, the vehicle will be declared a salvage vehicle. The accident doesn't have to be all that significant if the vehicle is older and isn't worth much at the time of the accident. Sometimes seemingly minor damage can spell the end of a vehicle's life, at least as far as insurance companies are concerned. If a car is totaled, that could be step one on the road to becoming a salvage vehicle. Often these vehicles are sent directly to the scrapyard, but occasionally, drivers who don't want to part with their vehicle can opt for a salvage title instead.
Even a new vehicle can be turned into a salvage vehicle after a severe accident. If the insurance carrier does not think repairing the vehicle is worthwhile, someone else may be willing to take on the job. But once an insurance carrier says it's not worth repairing, it will be issued a salvage title even if the repairs are undertaken. If you want to remove the salvage title by repairing the vehicle, it will have to undergo a rigorous inspection before you’ll be allowed to drive it on public roads. The inspection includes reviewing your receipts for all the parts you or your mechanic purchased to rebuild the vehicle. If it passes inspection, it will then be declared a rebuilt salvage title.
Each state has its own criteria for what makes a vehicle a total loss. Most states consider a vehicle that needs repairs that cost 75% or more of its total actual cash value a salvage.
It’s also worth keeping in mind that just because a car looks like it’s good as new on the outside doesn't mean that everything is functioning properly on the inside. If it has a salvage title, that’s probably for a reason.
Flooding is another reason a vehicle may get a salvage title. Many times the damage is not visible at all to a buyer. The water dries up and leaves little evidence behind. However, the mechanics of a vehicle can be severely altered, leaving the vehicle unreliable. Dealerships in flood planes are at risk of losing their entire lot due to floods and hurricanes. Of course, many individuals have to deal with flooded vehicles, too. Insurance carriers will cover flood damage if comprehensive coverage is selected.
Additional Reasons for a Car to be Salvage
It's not just major accidents and natural disasters that can cause a vehicle to be savage. Here are other common reasons:
- Kit cars: A salvage title on a kit car may mean it never passed the inspection needed for it to be properly registered or that it needs additional work.
- Restored antiques: If an antique has been properly restored, the seller should have a title. If it's a salvage title, you may need to take additional steps to repair it (and keep the receipts for any parts you use).
- Stolen car returned after a total loss payout: There may not be anything wrong with the vehicle, but if that's the case, the owner should have gotten a rebuilt title before selling it. In other words, do your due diligence before buying.
- Major car repair using aftermarket parts: A vehicle with important components that are aftermarket, like an engine, may have some risks. They can be more difficult to insure, for example. As with other situations, inspect the vehicle (or have a trusted mechanic inspect it) and get a report of the vehicle's history.