A salvage title is a title of a vehicle that has previously been severely damaged, repaired and then returned to the road.
The title is declared as 'salvage' by the insurance company when it determines the cost of repairs due to the damage would be between 75 and 100 percent of the vehicle's overall value.
When a vehicle is declared 'salvaged' the insurance company pays the owner the value of the vehicle rather than paying to have it repaired, often because the damage is too severe to bother fixing.
The vehicle's owner then has the option of paying for the necessary repairs out of pocket and returning the vehicle to the road -- it is then that the title is switched to 'salvaged.'
Different Salvage Title Criteria
The above definition of a salvage title applies in nearly every case. However, salvage title criteria differ between states and territories. In all 50 states, if you're selling a car that sustained significant damage in the past, you must disclose this damage up front to buyers. Any such vehicle is a salvage title or salvage vehicle, but the qualifying type of damage isn't the same from state to state or territory to territory.
A salvage title doesn't always imply damage incurred through a collision. In Arkansas, any vehicle drowned in water up to the dashboard or with damage exceeding 70 percent of the vehicle's total value is a salvage vehicle. In California, asalvage title applies to any vehicle that sustains considerable damage in a flood or through vandalism. Other types of salvage title damage include:
Theft Recovery: In the event someone steals your car, your insurance company may pay off the vehicle after a certain amount of time passes. If your car is subsequently found, the insurance company can legally sell your car to a salvager, who replaces the car's missing parts. The state then re-brands the car's title as a salvage title.
Hail Damage: If you live in a state where hail damages your vehicle beyond a certain percentage of your car's total value, your vehicle may qualify for hail damage designation. States that lack this designation issue a salvage title instead for extreme hail damage.
Non-Repairable: This isn't a salvage title, per se, but its criteria are similar. A non-repairable title indicates a non-operable or gravely damaged vehicle. Some states call this designation a junk title. A junk title is ineligible for repair by law and must be destroyed or sold to a scrap yard.
Life After the Salvage Title
A salvage title isn't the end of a vehicle's life. There's a huge market for salvage-titled vehicles. However, there are some legally-required prerequisites to the resale of a salvage title.
Initially, salvage title cars and motorcycles are legally restricted from registration and use on public roads.
In order to reuse or resell a salvage vehicle, you must first repair or restore it to operable condition for use on public roads and highways. Next, your vehicle must pass a salvage inspection. The inspection agency must be approved by your local department of transportation or department of motor vehicles. In many states, you must fill out a form to request an appointment for a salvage inspection. After your car passes inspection, you can have it rebranded with a 'rebuilt' salvage title.
The Pros and Cons of Buying Salvage Titles
They're cheap. Vehicles with salvage titles are almost always significantly cheaper than a similar vehicle (age, mileage, condition) with a clean title. Some salvage-titled vehicles are sold as-is with their original damage while others have been repaired. Those that are fixed are often 20 to 40 percent cheaper than the same vehicle with a clean title.
Purchasing a salvage title offers you two economical options: You can rebuild the car to your dream specifications over time, or you can use the car for parts.
If you decide to repair and rebrand the car, you can sometimes repair it very cheaply. Not all salvage titles are as catastrophic as the title implies. In these cases, you can buy a salvage title cheaply.
A salvage title never goes away. As stated above, even if you restore your salvage title to road-worthy condition, the title still carries its salvage for the entire lifetime of the car. It's difficult to get a car loan for a salvage title, even a rebuilt salvage title. Insurance companies are wary of any vehicle previously deemed a total loss. There is a fear that a rebuilt car may not be strong enough to endure a second life or that costly repairs down the line may inevitably lead to repossession.
Salvage title insurance is hard to come by and rather expensive. Since the car has a history of extreme damage, insurers consider salvage titles a greater liability. Similarly, trade-ins and resales are difficult with salvage titles. The majority of franchise dealers don't take salvage titles as trade-ins, leaving private sales as your primary option.
While salvaged-title vehicles are certainly cheaper when you buy them, you'll also need to sell it as a salvage title so you'll get less money for it than if it had a clean title. This is fine if you plan on driving the vehicle indefinitely and you're not concerned with its resale value but it's something to remember if you plan on selling it in the future. When you do, remember to be transparent about your vehicle's title brand. Doing so is the law.