Like a deed to a house, a car title proves that you own a vehicle. Car titles in the United States always include a vehicle's VIN, year, make, model, and odometer reading, regardless of the exact information on the document. It doesn't matter whether you buy a new or used car from a dealer or a private seller, you'll receive a title.
Along with showing proof of ownership, a car title also lets you know if a vehicle is damaged or defective. If you’re shopping for a used car, you may come across a vehicle with a salvage title that indicates water damage. And as we approach peak hurricane season, thousands of flood-damaged cars will likely enter the market in the coming months. What does that mean and should you avoid salvage title and flood-damaged vehicles? We have the answers.
What is a salvage title vehicle?
There are two types of titles: clean and branded. Clean titles indicate that a vehicle has a clean record, whereas branded titles indicate that the vehicle has suffered serious damage. Branded titles are most commonly salvage titles.
Salvage titles indicate that a vehicle has sustained significant damage and has been deemed a total loss by an insurance company. The vehicle was probably involved in a major accident, and the cost of repairing it exceeds its value. When that happens, the insurance company will pay out a damaged vehicle claim to the owner and take possession of the vehicle. If the car was damaged by severe weather, such as hurricane flooding or hail, it could be the result of a severe weather event.
Once the car is towed to an impound lot owned by the insurance company, it's sent to a salvage auction house that specializes in cars that have met an untimely end. A junkyard usually buys the car and uses its parts for scrap metal or to repair other vehicles. Alternatively, an auto body shop can repair and resurrect the car if the damage isn't too severe. Upon passing inspection, the once salvaged car will be resold with a rebuilt title.
Finally, a dealer may offer the car as is in the hope that it will attract a buyer who is willing to fix it.
What is the process by which a car becomes a salvage title vehicle?
States have different salvage title laws. One state's definition of a salvage vehicle may be different from another state's. The following categories of vehicles are usually included in salvage titles in most states.
There has been a collision with the vehicle.
Flood damage had been done to the vehicle. In some states, flood damage will be indicated on a vehicle's title, while in others, flood damage is classified as salvage.
Fire damaged the vehicle.
Storms such as hail or tornadoes have severely damaged the vehicle.
After being determined a total loss by the insurance company, the car was stolen and recovered.
In New York, if a vehicle is eight model years old or newer, and if it was destroyed or damaged for a minimum of 75% or more of its value, it must be branded as a salvage vehicle.
An insurance company must label a vehicle as salvage if it declares it a total loss in Florida. The percentage of total losses varies, however. A vehicle's value can be affected by repair costs as low as 50 percent or as high as 95 percent.
Salvage title cars are illegal to drive on public roads in most states. Check with your local department of motor vehicles (DMV) to find out what is considered a salvage vehicle in your state.
Flood-damaged vehicles are dangerous
Vehicles are designed to get wet, but not flooded. Flooded cars may have been submerged in multiple inches to multiple feet of water. When a car is flooded to that extent, it can cause anything from glitchy electronics to ruined engines.
The insurance company buys back flood-damaged cars and sends them to auction, where they are typically crushed. Some people fix flood cars and flip them. Flood-titled cars should also be avoided.
Avoid title washing
Moving the car to a state with lenient salvage laws can have the brand removed from the title. A vehicle sold in another state will get a new title since titles are issued by the state's RMV.
Physically altering a title can also rebrand it. Title-washing schemes involve removing all branding evidence from a paper document.
The crime of title washing can result in hefty fines and prison time.
Should you buy a salvage title car?
Salvage title cars come with many risks. Here's what to watch out for.
Salvage title cars pose an inherent safety risk. As these cars have suffered significant damage, there's a chance they haven't been repaired properly. Even if it was completely rebuilt, it may not have been repaired properly. In the event of an accident, airbags cannot be determined by inspection.
Sellers of salvage title cars will likely claim that the damage is minor because they are desperate for a sale. A salvage title is an as-is sale, so there is no warranty protection.
Some insurers won't cover salvage titles, while others will only offer limited coverage at a high premium. Salvage title vehicles are also not eligible for auto loans.
When you sell or trade in the vehicle, it will have a low resale value. It is possible that dealerships will not buy salvage vehicles cars, so you may have trouble selling them.
Salvaged vehicles can be beneficial to car buyers in some circumstances.
You might find a vehicle with only cosmetic damage, such as hail damage. Thus, it will be significantly discounted.
If you're a mechanic, buying a salvage title car doesn't carry the same risks. You can either repair the car or use the parts to fix other cars.
Salvage Titles: How to Determine
A vehicle history report, such as Carfax or Autocheck, and a VIN check should be performed before purchasing a used vehicle. Before purchasing a used vehicle, shoppers should obtain the VIN Check report which provides a comprehensive analysis that includes up to 200 data points.
According to the state DMV, the VIN Check provides title information. You will be able to determine if the vehicle has a clean title or if it has a salvage title or another type of branded title.
In many cases, the comprehensive report will link to vehicle history reports provided by CarFax and AutoCheck. The vehicle history report will provide detailed information regarding the title of the vehicle. The vehicle history report will provide details about the accident and where the vehicle sustained damage, for example, if a salvage certificate was issued following an accident.
When a used car's price seems too good to be true, you should investigate whether it has a salvage title. Before you become too attached to the vehicle, it is imperative to know this information early in the process.
A brief summary
The purchase of a vehicle with a salvage title and a checkered history is a risky undertaking. Even though a salvage title vehicle may appear to be an excellent deal, the potential safety risks likely outweigh the savings. A lack of financing options and additional insurance costs also contribute to the car's higher upfront cost. Even though it may be possible to find the occasional diamond in the rough that has been properly repaired or only has minor damage, flood-damaged cars should be avoided at all costs. While it is imperative to have every used car inspected by a trusted mechanic before purchasing, this is especially important if you are considering purchasing a salvage car. The mechanic can examine the areas of the vehicle that were damaged to determine whether they have been properly repaired.