Salvage Titles: What You Need to Know (Updated 2023)

Cars get totaled all the time, but it doesn’t always mean they’re junk. It only means that an insurance company decided that the costs to repair the car were too high relative to the car’s value. As a result, the car is deemed a “total loss” and issued a new title called a salvage title. Then, it’s usually bought by a scrapyard and sold for parts or fixed up and resold.

If you’re shopping for used cars and see “salvage title” in the description, you’re looking at a once-totaled car. This could mean a lot of things when it comes to the car’s history, but one thing is for sure: finding an auto insurance policy for this salvaged car won’t be easy.

What is a salvage title?

You might be curious what “salvage title” means because you saw a very cheap used car listing, got struck by temptation, and saw “salvage title” in the description. This is how most prospective buyers of salvage title cars get hooked on the concept: you see a price that looks too good to be true, and it turns out the salvage title is the catch.

A salvage title is issued when an insurer deems a car a total loss. In general, this means the insurance company has assessed that the repair costs to make a car roadworthy again exceed a certain portion of the car’s market value, usually between 60% and 90%. This varies by state.

That means that while this car may be cheap, it’s going to be a lot of extra work and risk compared to a vehicle with a clean title. That said, a lot of cars get salvage titles and aren’t that far from being roadworthy. But a salvage title vehicle is not legally drivable until it passes inspection from the DMV and gets a new title, called a branded title.

How a Car Gets Issued a Salvage Title

Many paths can lead to a car becoming a total loss. Sometimes, cars that are still in pretty good shape can be “totaled” but fixable with some easy tweaks or, in rare cases, totally drivable. Here are a few reasons that cars wind up as “totaled.”

Stolen vehicles in some states are issued salvage titles if they are abandoned and picked up by the DMV. This means they might be in fine condition but receive a salvage title nonetheless.

Flood damage can quickly overwhelm a car’s electrical system and make repairs challenging and costly, leading to a salvage title.

Accident damage from a serious crash or series of crashes can make very expensive bodywork on the vehicle necessary to get it back on the road. This is the most likely scenario for a salvage title. An accident on a car’s driving record is a bad sign because it’s possible that parts of the car have hidden damage that only emerges later.

Reasons You Might Buy a Salvage Title Car

Remember, a salvage title gets issued when the cost of repairs is close to or higher than the car’s value. But this means that some cars in decent shape can get salvage titles. Sometimes, a vehicle owner will reject the insurance company’s buyout and retain a salvaged car, fix it up, and sell it if they know it hasn’t suffered severe damage.

Some dealerships specialize in refurbishing salvage vehicles. If you decide to check out cars from one of these dealers, do your research before trusting them — the quality and credibility of each one can definitely range from great to terrible.

But all that being said, a salvage vehicle can sometimes be much cheaper than a standard used car, even though it takes lots of effort and risk to fix up, register, and insure one. Hobbyists take great pleasure in reviving salvaged cars and motorcycles. Used cars require lots of research and due diligence, but even more so when it comes to salvage.

Reasons to Avoid Buying a Salvage Vehicle

All used cars come with the risk that the previous owner has misled you about the vehicle’s history and resale value. But in the case of salvage vehicles, it’s a whole new ball game. You’ll want to really know what you’re doing and have some trustworthy and knowledgeable people around you before you proceed to buy a salvage vehicle. Here’s why:

High Repair Costs

These happen most often when a car has been totaled from a serious accident. To be reasonably sure that your salvage title vehicle doesn’t have hidden damage, you’ll need a very trustworthy mechanic and body shop willing to take a long look at the car.

Void Warranties

Sometimes, salvage dealerships provide warranties on their repaired vehicles. But the original warranty from the car’s manufacturer? Forget it.

Fraud

Odometer fraud and other shady tactics are a serious risk: When salvage vehicles get issued new titles and handed over to auctions, scrapyards, and private buyers, there’s the opportunity for fraud to occur before they re-emerge on the market, sometimes after crossing state lines. This is why a thorough history of your salvage car is so vital.

Loan Difficulties

Lenders don’t see salvage title cars as a sound investment, so you might be turned down for a loan or two if you’re trying to finance this purchase.

Expensive Insurance

Because salvage title cars so often have hidden problems, car insurance companies will charge you high premiums to insure your salvage title car. And their market value is hard to ascertain.

Depreciated Value

Dealers and other car buyers will be suspicious of a branded title, and you’ll have a hard time selling a salvaged car unless you lower the price substantially.

Once you buy a salvage title car, it’s a very difficult investment to recuperate. If your personal finances aren’t prepared to absorb the sunk cost of a vehicle that has a good chance of creating more problems than it solves, you probably aren’t ready for a salvage title car.

Important Things to Do Before Buying a Salvage Vehicle

Research salvage title laws in your state. Do some research on how your state DMV handles salvage titles and why cars have them. If the bar is pretty low, you might be in a state that has some robust salvage vehicles floating around.

Bring it to a repair shop (and consider a body shop as well) operated by someone you trust who’s willing to give the car a real once-over for any red flags regarding prior damage. Without the advice of someone who knows what they’re talking about, you probably shouldn’t buy a salvage title car.

Look into the car’s vehicle identification number (VIN) from the National Motor Vehicle Title Information System, and pay for a report that gives you a more comprehensive vehicle history. But remember, these are often incomplete and don’t tell you the whole story.

No matter what type of title the vehicle has, a vehicle history report from CARFAX is vital to understanding what you’re getting into. This can help you spot fishy patterns that might obscure title washing, where a vehicle’s title can be falsified or altered, often when it crosses state lines. Look for unexplained gaps and mileage discrepancies.

Getting a Clean Title for Your Salvage Title Car

When you, a repair shop, or a car dealer has done the necessary repairs on a damaged vehicle, you can take it to the DMV and get it inspected. If it passes, the DMV will issue the car a “rebuilt title.” A rebuilt title is also called a branded title, and it’s not the same thing as a clean title.

Rebuilt vehicles are good to drive like any other car, though keep in mind that the value of the car will be far lower than the value of a comparable car with a clean title. Unfortunately, your car’s branded title will always be a red flag if you try to sell or insure it. Car buyers and dealerships will pay less for it if they buy it at all, and some insurance companies will pass.

How to Insure Your Salvage Vehicle

Be warned: not all car insurance companies will sell you a policy for a car with a salvage title, and when they do, it may be expensive. If you already have car insurance, check with your insurance provider to see if they’ll cover it. Because it can be hard to estimate a car’s market value, not all car insurance companies will provide your car with a full-coverage policy.