More people are asking themselves "but, should I buy a car with a salvage title? or not" as the salvage auto auction business is growing bigger by the minute. There really isn’t an easy way to answer such a question.
In short, the best way to answer it is by saying, “It depends.” All the variables and the factors related to buying a salvage title car can result in many different scenarios. This means that buying a salvage vehicle can turn out to be the deal of a lifetime but it can also result in money thrown down the drain.
However, we know how to give you the details regarding the whole process of finding and purchasing a salvage car. After we reveal the mechanisms behind it, as well as the risks and the potential the vast salvage vehicle market holds, you will be able to find the correct answer for yourself.
What Is a Salvage Title
When people hear “salvage title”, they are often skeptical and full of doubt, which is a mistake. We wouldn’t be able to explain anything related to auto auctions and the second-hand car market without pointing out the definition of a salvage car. Keep in mind that different jurisdictions have their own laws and rules regarding the issuance of salvage titles.
In general, a vehicle is retitled as salvage due to excessive damage that was severe enough for the insurance company to write it off. If the value of the repairs needed exceeds at least half of the value of the vehicle in its pre-accident condition, it is declared a total loss. Even perfectly good cars with minor damage end up being declared a total loss because of the high repair costs.
Auto shops’ rates have been rising for years. This is why insurers often prefer to compensate their clients for the damage and take ownership of the vehicles before totaling it. Insurance companies rarely sell vehicles themselves, which is why millions of cars and trucks are sold at salvage auto auctions every year.
An important note to make here would be that there is a key moment in buying a salvage car. Much too often, the vehicle has only suffered minor damage, but due to its market value, the insurer still decides to write it off instead of losing time and money fixing it. This is how such cars end up at auto auctions. It is all a matter of calculation, and nobody cares if the vehicle is running or reparable.
Most often, the reason for the salvage title of a vehicle is its involvement in a road accident. There are severely crashed cars beyond repair, but there are also vehicles in nearly immaculate condition that are the most desirable, of course. Apart from a collision, there are numerous other reasons for a vehicle to be retitled as salvage, such as theft, flood, fire, etc.
What Are the Risks Related to Buying a Salvage Title Car
There are many things to look out for when you dive into the world of salvage auto auctions. Having some experience is key but even if you are just getting started, knowing the basics might keep you out of trouble.
First and foremost, the condition of the vehicle matters. Before bidding on a car, make sure that you have carefully checked everything about it. A vehicle report would only be the first step, as there are plenty of possible issues. Even if you are satisfied with what the vehicle history report states, you need to assess the possible damage.
Double-check for Floods or Other Damage
Every case is individual. If the car you are interested in has been involved in an accident, there is no telling what the damage to the undercarriage could be. There are cases when a car that appears to have minor exterior imperfections has suffered severe undercarriage damage. When the car is known to have been previously flooded, you should probably walk away. Such vehicles often look almost brand new, but there is no telling what kind of electrical or transmission damage they might have.
Be aware that some kinds of structural damage can be repaired, but the car will never be as solid as it came out from the factory. Even if you intend to resell the vehicle for profit, you should probably stay away from severely damaged vehicles.
Salvage cars are sold in the exact state they have arrived at the auto auction. Selling a vehicle “as it is” has some pros and cons, but the biggest issue is that you are never fully aware of the extent of its damage.
Sure enough, a bruised bumper and a broken headlight would probably indicate a minor previous accident, and such damage is always easy to fix. In some cases, vehicles are sold partially dismantled because of the inspections performed by insurers. This could give you a better idea of the extent of the damage, thus the risks you take would be reduced.
Beware of Scammers
One of the worst things that could happen to a bidder is to buy a car that has been severely damaged and sold to a scammer first. These cars are often repaired for the sake of looking better or more complete instead of mangled. As a result, buyers are happy with their purchase until they realize they have been tricked and the vehicle they bought is anything but a good purchase. The problem is that salvage cars are sold without the option for a thorough inspection or a test drive, which makes the assessment of their mechanical state impossible.
Bear in mind that things could be even worse: you could buy a car that has been previously restored using stolen parts: this could mean that you would never be able to pass the DMV state inspection and register the vehicle as “rebuilt salvage”. Any vehicle is not roadworthy until it gets retitled.
Get a Second Opinion
There is no warranty or guarantee, and it is a good idea to consult a mechanic or someone with plenty of experience in this field before placing that bid. Such a move could save you a fortune.
Talking about extra costs, you should take the auctioned vehicle’s location under account when making your calculations. Towing and transportation are not cheap, and such expenses can make a great difference, especially when you bid on cheaper cars.
There is yet another risk that you should be aware of: even if you are convinced you will make a profit after you repair and later resell the vehicle, it would still not reach the usual market value of the particular make and model.
The reason is simple. Even if you fully repair the salvage car, and it passes the local DMV’s inspection, it is retitled as “rebuilt salvage”, meaning that it will never have a clean title again. Such vehicles are often 20% to 40% cheaper than identical cars with clean damage history.
Should I Buy A Car With A Salvage Title From Auctions?
People bid on salvage vehicles for a number of reasons. The rapidly increasing popularity of auto auctions is not something to wonder about. As more vehicles are written off by insurers each year, more buyers realize this market’s potential.
Most people are in this game for the money. They wait for a good deal and hope for the best. If their calculations turn out to be correct, they end up buying a nearly intact vehicle valued at a fraction of what it’s worth in immaculate condition. They repair the car themselves and retitle it before exporting it or selling it for a profit on the second-hand auto market.
Patience Is a Virtue
You can always join an auction if you want to pay less for the car you intend to drive on a daily basis. Patience is a virtue in this case. You must know what you’re looking for and set a budget to stick to. It would be a matter of time before you eventually find the desired automobile and place a bid on it.
Car enthusiasts often browse auto auctions in search of the perfect donor car. This is especially true when it comes to imports. Car guys know that they would pay a fortune for bits they would need in the future, and if they can get their hands on a parts car for a very reasonable price, they would not hesitate at all before bidding on it.
Certain individuals are only interested in the lowest price possible because they use the salvage cars they buy for parts. In the majority of such cases, these people always end up making money from cars that are nothing but junk.
You don’t need to become a car dealer to flip cars: people often do it as a side gig. Online auto auctions give you the opportunity to make money from the comfort of your home. With some luck, you can strike a really good deal.
Will You Be Able to Insure a Salvage Title Car?
One of the downsides of owning a salvage title vehicle is insurance. Since the vehicle history remains visible for everyone to see, and given the fact that the said vehicle will never have a clean title again, most insurers will be reluctant to insure it.
Due to the possibility of hidden damage or reduced structural stability of the vehicle, insurers prefer not to cover such cars. Even if you happen to find a company willing to insure a rebuilt salvage vehicle, the premium could be double or more, compared to the premium you would pay for the same vehicle with a clean title.
Apart from insurance, there are other issues to consider. If you want to trade in your salvage vehicle, you will learn that most car dealers would never accept such a deal. When the time to sell your repaired and retitled salvage vehicle comes, the buyer must have cash only. That’s because salvage cars are considered high risk by banks, and financing such a purchase would be nearly impossible. This is one of the reasons why rebuilt salvage title cars are valued less than second-hand vehicles with a clean title.
Should I Buy a Car with a Salvage Title – The Upsides
Needless to say, one of the main motives behind such a purchase is the low price. The possibility of owning a vehicle in running condition that costs 50% less than its normal market value is nothing but tempting. Of course, not every car at an auto auction is a bargain, but there are plenty of good deals out there.
Almost new, high-class cars have an insignificant drop in value even if they have a salvage title. You can never expect for a luxurious sedan to be worth 40% or 50% less because of its salvage title and some minor exterior damage. Cheaper cars can bring the best profit, as their salvage value can be as low as a third of what they’re usually worth on the second-hand market.
The best-case scenarios are what you should aim for. Natural disasters, for example, are not always a reason for you to walk away. A flooded vehicle is a risky purchase, but one with hailstorm damage is exactly the opposite. Such a vehicle has a low salvage value, but it can be easily repaired, as the modern paintless dent repair techniques allow for an easy fix of the body panels.
Another option to look out for is a theft-recovered vehicle. Stolen cars are often retitled as salvage when their previous owners have already been compensated by the insurance company by the time they are recovered.
Theft-recovered cars are often left intact when returned to the insurer, but they are still valued less. The reason is simple: after taking ownership of them, the insurance company needs to write off the car and retitle it as salvage before sending it to auction.
As a result, running cars with no damage end up being sold as salvage. That often leads to great deals. Even when thieves take certain parts from the car they steal, it could still be worth repairing if you can do it yourself and save huge money from not taking it to a specialized auto shop.
Who Is Likely to Buying A Vehicle With A Salvage Title
It is more than obvious that not everyone asks himself the question, “Should I buy a car with a salvage title?”, and not everyone would bid on salvage cars either. Apart from scrap dealers and used parts traders, it takes a specific kind of person to participate in a salvage auto auction.
If a person has the right skills to repair a damaged car and is willing to make some money out of it, such a purchase may turn out to be profitable. You are likely to lose money if you rely on the services of an auto repair shop, as high costs are usually the reason why the car was salvaged in the first place, meaning you could hardly make a profit, following this route.
There are buyers who are unable to finance their purchase, so they are looking for something decent to drive at half of its usual price. With salvage vehicles, they have a good chance of sourcing one that is in need of minor repairs before it is eligible for state inspection.
Should I Buy a Car with a Salvage Title – the Verdict
As you can see, trying to be a part of the salvage auto auction world is not easy. However,it is not that hard, either. You should buy a car with a salvage title if you can appreciate all the pros of such a purchase. Again, here is what you need to do:
- Stick to your initial idea and set a budget. Don’t bid when you feel emotional about a particular car. Salvage vehicles can return a hefty profit if your calculations are correct.
- Always do your homework. Check for previous repairs and use the VIN to get the full vehicle history report.
- Find support. If you feel that you can’t handle the assessment of the vehicle’s condition, someone with experience in auto repairs would help you with that.
- Trust dealers and auto auctions with immaculate reputation and positive feedback. This is crucial, as the chance of becoming a victim of some scammer is really small in this case.
- Make sure you are familiar with the local laws and legislation.
If everything turns out to be in your favor, you could score a deal of a lifetime. You could either end up having your dream car in your garage for half of what it’s really worth or sell the car for a profit after repairing and retitling it, despite its lower market value due to the “rebuilt damage” title.
While the target audience for salvage auto auctions is rather limited, we believe that many people who have never been involved in the car industry can discover the possibilities of this vast world and make some money while doing so.
Considering the pros and cons of buying salvage cars, taking the right steps and having a bit of luck could result in more than a few successful deals.
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