When do you need a salvage title

This can result in a lower resale value. Only some auto insurance companies offer coverage for vehicles with rebuilt titles. And among those that do, coverage options may be limited. Salvage vehicles are usually much cheaper because of their title status. Mechanics, body shop technicians and DIY car restorers may also want to consider a salvage car. Salvage vehicles often present more risks than most car buyers are willing to handle. Safety concerns, the potential for costly repairs, and difficulty insuring and selling your car can make the decision clear for most people.

Sometimes insurance companies will allow you to keep a totaled car and reduce your payout by the remaining value. But be prepared to pay a hefty repair bill to get your car back into good shape.

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Other product and company names mentioned herein are the property of their respective owners. Licenses and Disclosures. Advertiser Disclosure. By Brian O'Connell. While categories vary on a state-to-state basis, a salvage title may signal a car is damaged in the following ways: The vehicle has collision damage from an accident.

The vehicle has experienced fire damage. The vehicle has experienced flooding damage. The car has been stolen, and parts may be missing, and other damage done to the vehicle. The vehicle was formerly a heavily-used taxi, law enforcement vehicle, was returned under a warranty, or has been remanufactured for resale purposes.

But salvage car purchases come with significant risks, including these: Financing : Banks, auto finance companies, and other lenders are reluctant to finance cars with salvage titles. That's typical because salvage vehicles don't have a Blue Book value making it very difficult to place a financial value on a salvage title car.

Unknown History : Auto lenders also hold back on financing because they're unsure of a salvage title car's accident and repair history, or don't fully know how stable the vehicle will be once it hits the road. Low Trade-in Value : Owners of salvage title cars can expect to face problems trading in the vehicle if and when they decide to buy a new car, truck or SUV.

Usually, auto dealers won't accept salvage title cars as trade-ins, due to the inherently higher risk of having trouble "flipping" the vehicle and selling it to another buyer. Low Insurance Value : If you buy a salvage title car and it's in an accident, the insurance company likely won't be paying out big money to cover the damage, given the salvage title car's low financial value in the first place.

High Interest and Short-Loan Terms : If an auto lender decides to finance a salvage title car, truck or SUV, the borrower can expect higher interest rates and shorter loan-repayment timetables, as auto lenders seek to protect themselves from problems linked to salvage title cars, due to the high-risk collateral of a salvage title vehicle.

Keys to Buying a Salvage Title Car It's advisable to do some significant due diligence on a new vehicle purchase, to identify it as a salvage title car.

The Signs of a Salvage Title Car While you should always check the vehicle history report and have a trusted auto mechanic review the vehicles for problems, there are obvious signs that a vehicle is basically a rebuilt lemon and should be avoided. Look for these tell-tale signs: Most states require direct identification of the vehicle that's been in a salvage situation on the title. Ask to see the title before anything else.

The vehicle paint easily chips off or doesn't match the rest of the vehicle This could indicate an intent to hide damage by the seller. Any wheel misalignment could point to frame collision damage. A car door that doesn't open or close properly could also mean the vehicle underwent major repairs and was improperly repaired If the vehicle's hood is misaligned and doesn't close perfectly, that could be an indicator of a major collision impacting the front and sides of the vehicle.

If your electrical components don't work properly—especially if they flick on-and-off intermittently—that could be a sign of significant flood damage to the vehicle. Check the Original Repairs Ask the salvage title car's insurance company for the original repair estimate of all work done on the vehicle. Research Alternative Auto Financing Options Chances are, getting a good auto financing deal for a salvage title car isn't easy. Investigate State Lemon Law Purchase Options Some refurbished cars get a different, state-sanctioned stamp of approval in the form of a so-called "lemon law" used car sale.

Lemon Laws Under most state lemon laws, a dealer must, at no cost to the buyer, repair any problems with the vehicle over a specified period of time or provide for full reimbursement for the costs of such repairs. What to Do If You Unknowingly Purchased a Salvage Title Car If you unknowingly purchased a salvage title car, and want to back out of the deal, you do have legal recourse.

Insurance companies will consider a vehicle totaled if the cost to repair it after an accident exceeds a certain percentage of its value. Many states specify standards for this valuation, though for many insurance companies, the standard limit is 75 percent of the vehicle's total value. In this situation, the insurer sees replacing the vehicle as a more financially wise option than repairing it [source: Carfax ]. A salvage title should, first and foremost, be a warning flag that a car may have been damaged in an accident.

The plastic body panels and high-tech components that go into today's cars can mean that even a small accident might lead to very expensive repairs. An accident could also cause subtle -- but irreparable -- damage to the car's frame or other critical parts. Insurance companies may be more likely to repair a car if they choose to use alternative parts -- components from manufacturers other than the one that built the car.

While the quality of these parts is supposed to equal that of the original vehicle, it's worth investigating how a car was repaired if it was ever in an accident. If the car was totaled and you're in the market for a fixer-upper, you owe it to your safety -- and that of your future passengers -- to thoroughly understand the extent of the damage, to determine if it's within your ability to repair. According to statistics, a car is stolen in the U.

Insurers often act quickly to help their clients get back on the road after a theft, which leads to the second reason the car of your dreams may have a salvage title: It was recovered after being stolen. Not every car that gets stolen ends up with a salvage title. If the car is recovered quickly, the police may simply return it to the owner. In cases where the car is not recovered for weeks or months, the insurance company may have already replaced it for the owner.

In essence, the insurance company writes off the original car as a total loss. The car, when recovered, is then titled as if it had been written off due to a totaling accident. A car given a salvage title for a non-damage reason can often have the title changed to a rebuilt title, a designation that then allows the owner to operate it legally on the street. Often, this simply requires a state inspection for safety, although the details of the inspection and re-titling process vary from state to state [source: Salvage Title Cars ].

If you're interested in a car that has a salvage title, and the owner claims it was stolen and recovered, find out why the car hasn't been re-titled yet. The owner should have done this before offering the car for sale as a matter of good business; failure to do it may be a sign that there's something else wrong with the car. Widespread natural disasters like earthquakes and hurricanes wreak havoc on vehicles.

A car tossed on its roof by a massive temblor is going to sustain a fair bit of damage, as is a car that spends a day half-submerged in a hurricane. The demand on insurers to evaluate these vehicles can overwhelm the insurance system; even though the vehicles are often supposed to be pulled from circulation due to the damage, they can slip through the organizational cracks -- whether through fraud or a simple honest mistake -- and end up on used car lots.

The salvage title is a safety device in these situations: A person trying to sell a flood-damaged car with a salvage title may face tough questions if he or she tries to sell the car and claim its title came from a theft or other non-damage reason. But water damage can be hard to detect in a vehicle that has been thoroughly cleaned, and it's all too easy for an unscrupulous seller to profit by selling a flood-damaged car to an unsuspecting buyer.

If a car appears to be clean, safe and undamaged, but has a salvage title and comes from a flood- or hurricane-prone region, be wary of flood damage. Checking the history of the vehicle using its vehicle identification number, or VIN, is a effective way to find out where it has been licensed and if it has been damaged [source: Lease Guide ]. This reason for a salvage title is very similar to the previous one, and should prompt you to inspect the car for flood or water damage.

But in certain situations, cars that were on a dealer's lot during a natural disaster may be given salvage titles, even if they weren't damaged to the point of salvage. Imagine a scenario where a car dealer has a lot on a hillside. A flood tears through the area, submerging the lower half of the lot and ruining the cars parked there. When the insurance inspector arrives to evaluate the damage, she sees a lot filled with hundreds of cars: The half in the lower lot sustained various amounts of damage, while the ones at the top of the hill were untouched by the flood.

Depending on the number of vehicles involved, she may decide to write off the entire lot, rather than incurring the cost to inspect every car, repair the slightly damaged ones and total the ones damaged worst by the flood [source: Lease Guide ].

The undamaged and less-damaged cars caught in these dealer stock write-offs can present deals for buyers willing to do research into what happened to cause the write-off. Buying a car involved in one of these write-offs, repairing it and getting it a rebuilt title could possibly be less expensive than buying a model with a clear title.

But dealer stock write-offs are not free tickets to cheap cars. Insurance may be higher on cars with rebuilt titles, and it could take a great deal of research to determine what happened to the dealer's lot, and if the car in question was truly an undamaged car caught up in a broad-brush insurance decision.

The designation of a salvage title for a vehicle doesn't necessarily mean it's headed for the scrap heap. Some states label salvage-titled vehicles as "repairable" or "irreparable," designating whether they can be rebuilt and re-titled, or they must be used for parts or recycled [source: QuinStreet Insurance Agency Inc. When a vehicle with a salvage title can be safely repaired, the licensing state will often issue a rebuilt title after the vehicle passes a safety inspection.