A branded title indicates that a vehicle has sustained significant damage, has been declared a loss by the insurance company and then issued a new title by the state’s motor vehicle department indicating its new status. Branded titles are permanent; they stay on that vehicle for the rest of its lifespan. These titles vary by state, but the most common types are vehicles declared to be lemon, salvage, water damaged, and odometer rollback title brands. Vehicles with branded titles may have been damaged in a floor, severe crash or other devastating event.
When shopping for a used vehicle, always check its title status. You may find the car of your dreams in what appears to be perfect condition, at the perfect price, but upon further digging, see that it has a branded title. A branded-title vehicle might be a good deal if you are looking to save money on your car purchase, but you may not be able to finance, insure or resell it.
Here are some types of branded titles:
1. Lemon Title Brand
Most states have lemon laws that allow people to return new vehicles if they have mechanical problems that exceed a certain threshold of cost or severity. If a car that is still under warranty malfunctions in such a way that it becomes inoperable or unsafe to drive, a consumer may use lemon law protections to return it to the manufacturer. If the problem persists after the manufacturer has had a chance to repair the vehicle, a state may brand it a lemon. This brand shows on the vehicle’s title and its vehicle history report.
2. Salvage Title Brand
If a vehicle has been involved in a severe accident and the cost of repair approaches or exceeds its fair market value, an insurance company may declare it a total loss and get a salvage title on it. Definitions of cars that qualify for salvage titles differ by state. Some states also issue a salvage title for vehicles that have been stolen or vandalized and have not been recovered in 21 days. These vehicles can be repaired to a satisfactory and safe condition and resold with the salvage title, but their value will never match that of the same vehicle with a clean title.
3. Water Damage Title Brand
Hurricanes and flash floods can damage the engine, electrical components and interiors of vehicles left on streets or in underground parking lots. If a car is submerged in water for more than two days, an insurance company deems it water-damaged, processes the claim, and retitles the car to reflect the water damage. The insurance company then sells the branded vehicle to a salvage yard which may scrap it for parts or recondition it and return it to the market.
4. Hail Damage Title Brand
If a vehicle’s body is thoroughly damaged in a severe hailstorm, an insurance company may declare it a total loss and get a hail damage title. Many states issue hail damage title brands to distinguish between vehicles totaled by hail and those damaged by floods. These hail-damaged vehicles are preferred over other types of branded titles because they usually just have superficial damage to the body and glass, rather than mechanical or structural issues found in vehicle damaged in accidents. In states which do not have the hail damage designation, vehicles damaged by extreme weather usually get a salvage title.
5. Odometer Rollback Title Brand
Dishonest car sellers may alter odometer readings so that a car shows it has less mileage than the actual distance it has been driven. Often, the buyer of a car whose odometer has been altered ends up paying thousands of dollars over the real worth of the car. Odometer disconnection, rollback or resetting is a felony offense in the United States, so dealers who commit this fraud go to great lengths to conceal it. If odometer fraud is detected, reported, and proven, the perpetrator is charged and the car is given an odometer rollback title brand.
Should You Buy a Branded-Title Vehicle?
A vehicle with a branded title can sell for up to 40 percent less than a similar vehicle with a clean title. If you are on a tight budget, or if you are in the market for a second vehicle, you can get a set of wheels with a branded title without breaking the bank.
However, before you jump at the opportunity to save thousands of dollars, you should consider that branded title vehicles are cheap for a reason. No matter their condition, state motor vehicle agencies, bankers, insurers, and car manufacturers consider these vehicles junk. They are often ineligible for traditional financing, extended warranties, or manufacturer recalls. They are also expensive to insure because it can be difficult to document the full scale of the vehicle’s damage and the quality and safety of the repairs. As a rule, a branded title reduces the value of a vehicle in good condition by half.
Some states do not allow vehicles with salvage titles to be driven on public roads. If you want to rebrand the title, the vehicle has to go through a complex inspection supervised by a state motor vehicle bureau to verify that it meets safety standards. Even if you rebuild the vehicle to roadworthy condition and it passes the inspection, the branded title will still reduce its resale value to about half or two-thirds of its estimated value.
How to Find a Good Branded-Title Vehicle
If you insist on buying a branded-title vehicle, you should take a few precautions to ensure you don’t end up with a lemon that costs more in repairs than it is worth. As with any other vehicle, you should only buy a branded-title vehicle from a reputable dealer. Search for online reviews and ascertain that the dealer you are going to buy from is known for selling reliable vehicles. Establish also that the dealer has a record of making quality repairs.
When you settle on a vehicle you would like, ask the dealer for the original repair estimate. It will show you how severe the original damage was and what parts were compromised. It should also outline the quality of parts used to repair the vehicle (look for parts made by the vehicle manufacturer itself, not parts made by a third party). You might need to walk away if major components such as the engine, transmission, safety systems (like airbags) and chassis were too damaged or not repaired to high standards.
To be confident you are getting value for your money, bring a mechanic with you for the inspection. Have him or her go through the repairs that were done on the vehicle and look out for potential red flags. A professional will find parts that still need repairing and help you estimate if the vehicle is worth buying.