Salvage title cars: Should you buy one?

Mechanic fixing car engine in auto repair shopImage: Mechanic fixing car engine in auto repair shop

In a Nutshell

A salvage title is usually issued when car has been damaged in a wreck or other incident and the cost for repairs is more (or nearly more) than the car is worth. Each state has its own rules that define salvage titles, so check the laws for your particular area. While a salvage title car may be less expensive, the vehicle may not have been properly repaired — and it could be difficult to insure.
Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

If your car was seriously damaged in an accident and it will cost as much as — or more than — the vehicle is worth to fix it, chances are you’ll end up with a salvage title.

And if you’re shopping for a used car, you’ll also want to make sure the vehicle you want has a “clean title,” which means checking that a salvage title hasn’t been issued for something like a total-loss accident. If it has, then you’ll probably want to triple-check that the car is safe.

The laws governing salvage titles vary from state to state, so be sure to check your own state’s rules. Here’s some info to get you up to speed on what salvage titles are and potential pros and cons of buying a salvage title vehicle.

What is a salvage title?

Most often, a salvage title means a car has extensive damage that’s near or in excess of the value of the car. While the exact rules vary by state, they can have similarities.

For example, Minnesota salvage title laws say a salvage title is required for each of these situations.

  • An insurance company acquires the damaged vehicle after paying a total loss claim
  • A vehicle’s damage is more than 80% of its value and the vehicle’s owner is self-insured
  • A vehicle has an out-of-state salvage title

New York’s laws are similar, though there are some differences, including that the repair costs must total 75% or more of the car’s pre-damage market value.

In many states, a salvage title car can’t be driven on public roads.

Check with your state’s transportation agency or department of motor vehicles to find out what’s considered a salvage vehicle where you live.

It’s important to note that it’s not just accidents that can cause a car to be totaled. Flooding, fire, vandalism, theft and other major events like hail storms can also result in damage that warrants a salvage title, depending on the state.

Are salvage titles bad?

Choosing a car with a salvage title can be dangerous if the car hasn’t been properly repaired or rebuilt. States typically require a “rebuilt title” and inspection if the car has been repaired to ensure that it’s roadworthy again.

But your safety could still be at risk. If the previous owner restored the car’s exterior, but didn’t fix important safety features like airbags, you could be seriously injured if you get into an accident.

Even if a car has been completely rebuilt, it may not have been repaired well. If there was significant frame damage, you may find that the doors don’t shut correctly or the windows don’t seal properly.

You’ll also want to watch out for “title washing.” Title washing means illegally removing a car’s branded title status. Dishonest auto sellers may apply for a new title for the salvage vehicle in a different state or withhold information on a new title application.

How can I check if a car has a salvage title?

Vehicle history reports, like those offered by CarFax and AutoCheck, can often alert you if a salvage title has been issued in the car’s history.

Can you get insurance on a car with a salvage title?

You may have trouble insuring a car with a salvage title, even if the car has been repaired and issued a rebuilt title. Car dealerships, used-car buyers and insurance companies may have trouble assigning a value to your vehicle because they don’t know its condition under the surface. 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.

What are the potential benefits of buying a salvage vehicle?

While it’s not for everybody, there may be some benefits to buying a car with a salvage title — if you buy the right car and have the right skills.

Salvage vehicles are usually much cheaper because of their title status. If the damage was solely cosmetic and you don’t care about looks, the car may still be otherwise reliable. But you should get the car thoroughly checked out by a mechanic to ensure there aren’t any potential safety issues.

Mechanics, body shop technicians and DIY car restorers may also want to consider a salvage car. If you’re a skilled mechanic, you may be able to complete most of the repairs yourself or use the car for parts. That said, you’ll need to stay away from major damage that you can’t repair yourself or don’t want to pay someone else to do.

Next steps

Salvage vehicles often present more risks than most car buyers are willing to handle. Unless you’re a skilled mechanic or you’re looking for a project car, it’s often best to avoid buying salvage title cars. Safety concerns, the potential for costly repairs, and difficulty insuring and selling your car can make the decision clear for most people. If you’re considering it, be sure to get a vehicle history report and have a trusted mechanic inspect the car.

But what if you love your wrecked car and don’t want to part with it, even after it’s declared a salvage title car? If that’s the case, just be sure to keep your eyes wide open to all of the costly possibilities. 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. Even then, the car’s value after repairs will likely be much lower because of the salvage title.

About the author: Lance Cothern is a freelance writer specializing in personal finance. His work has appeared on Business Insider, USA and his website, Lance holds a Bachelor of Business Administration in … Read more.