By Sarah Williams, J.D. | Legally reviewed by Katrina Wilson, Esq. | Last reviewed July 27, 2023
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You may have gone shopping for a used car and come across the mysterious disclaimer, "salvage title," on one of the cars you considered. Why are their market values so much lower? Vehicles with a salvaged title pose several risks for a potential car buyer compared with a new car. Anyone considering purchasing a salvage-titled car should remember the Latin phrase "caveat emptor," which means “let the buyer beware."
The following article outlines the concept of salvage titling and how different states deal with this designation.
Most jurisdictions issue a salvage title when a vehicle is in an accident and deemed a total loss by the insurance company, which pays a claim for the value of the vehicle. Someone can then repair the car and return it to the market with a salvage title. When that happens, the salvage title becomes a warning to the buyer.
Salvage-titled vehicles are a great deal because they're sold at a much lower market value than similar, undamaged cars. While Kelley Blue Book does not set a value on salvaged vehicles, these vehicles sell at less than half the cost of a comparable car.
A mechanic might be able to get a great deal on a salvage-titled car, but if you're a novice, proceed with caution. When a vehicle is repaired after a car accident, it may still have some critical defects reflected by the car's low value. The California Department of Consumer Affairs found many salvaged cars returned without completing a safety inspection.
Consumer protection laws require certain disclosures about a car's history to prevent sellers from fraudulently hiding facts about their vehicles that might be difficult to spot with a surface inspection. Salvage titles are one such disclosure. The type of motor vehicle issued a salvage title depends on the state's laws that issue the title. Several states require the issuance of salvage titles to identify stolen vehicles, such as:
A repaired salvaged vehicle has a new title called a rebuilt title. It is a refurbished, damaged vehicle. If a car is stolen and later recovered, states may issue a “rebuilt title."
States, and in some cases insurers, have different standards for determining when a vehicle has sustained enough damage to qualify as a "total loss." If the repair costs exceed the car's calculated value, the insurer will consider it a total loss, pay the claim, and take possession of the car. This may include flood-damaged or non-repairable vehicles, depending on the state.
A vehicle that's suffered damage amounting to 75 percent of its value is a total loss.
Your insurance company declared your damaged car a total loss. What now? You must get a branded title designating its status as salvaged by visiting your state's Department of Motor Vehicles (DMV).
The salvage certificate is issued to your auto insurance company, which may then auction to sell the vehicle. The rules for salvage vehicles, titles, and certificates may change depending on your state, so check your jurisdiction for the most accurate laws.
Depending on the state, the new vehicle owner may receive the salvage certificate as proof of ownership. Then the new owner will inspect the vehicle and vehicle identification number (VIN) verification and may review the vehicle history report.
You can run a vehicle history report and check the VIN for free by visiting AutoCheck, the National Insurance Crime Bureau (NICB), the National Motor Vehicle Title Information System, Kelley Blue Book, or Carfax.
Apart from the obvious risks involved in purchasing a salvage-titled vehicle, there are more complications potential buyers should consider.
Salvage vehicles are difficult to resell. Dealerships often refuse to accept salvage titled cars, even as a trade-in, meaning resale is a hassle. Since the car does not have much resale value, insurance companies may be unwilling to pay out very much if an accident results in new damages.
If you have a car with a rebuilt title, you may have trouble finding a car insurance company that will provide full coverage for your formerly damaged vehicle. But several auto insurance providers offer at least liability insurance for these car buyers.
You may have a potential claim for any damages that stem from a seller's non-disclosure that your vehicle was once deemed a total loss or stolen. You may also have a claim if the car should've been issued a salvage title and it was not due to a misrepresentation by the dealership/seller. But, once you're warned or know that the vehicle has a salvage title, your chances of recovering damages diminish.
Several legal issues can arise around salvage-title vehicles. Whether you bought a salvage title vehicle through fraud, have an argument with an insurer about their coverage of a salvage title vehicle, or any disputes arise involving a salvage title, you'll benefit from the help of a consumer protection lawyer experienced with your state laws.
Contact a local attorney for a legal case assessment to learn how to ensure your experience with a salvage title vehicle doesn't result in total loss.
Contact a qualified auto accident attorney to make sure your rights are protected.
Get tailored legal advice and ask a lawyer questions about your accident. Many attorneys offer free consultations.