How Does a Car Become Salvage?

Before you buy a salvage title vehicle, you should understand what you're getting into. An insurance company has declared a loss on salvage title vehicles that have been damaged beyond their market value.

The most common way for a vehicle to be salvaged is if it is involved in a major accident or natural disaster. However, in some states, a vehicle can be given a salvage title if it was stolen and never recovered by police. All of these reasons should be cause for concern, and you should proceed with caution.

Here are some of the most common reasons why a vehicle is salvage-titled.

Major Accidents

If you are in an accident and your car is declared a total loss by your insurance company, you can keep it and have it repaired—but your provider will classify it as a salvage vehicle. The accident may not have been severe, but the car may have been damaged beyond repair. This is common in older vehicles, which may not be worth much at the time of the accident.

After a serious accident, even a new vehicle can be converted into a salvage vehicle. If the insurance company does not believe that repairing the car is worthwhile, someone else may be willing to do so. However, if an insurance company determines that it is not worth repairing, it will be issued a salvage title even if the repairs have been completed.

If you want to remove the salvage title by repairing the vehicle, it must pass a thorough inspection before you can drive it on public roads. The inspection includes a review of all receipts for all parts purchased by you or your mechanic to rebuild the vehicle. If it passes inspection, it will be designated as rebuilt salvage.

Each state has its own definition of what constitutes a total loss. Most states consider a car to be salvage if it requires repairs that would cost 75% or more of its total actual cash value.

It's also important to remember that just because a car appears to be in good condition on the outside doesn't mean it's in good working order on the inside. If it has a salvage title, there's probably a reason for it.

Natural Disaster

Another reason a vehicle may receive a salvage title is flooding. Often, the damage is not visible to the buyer. The water evaporates and leaves little trace behind. However, a vehicle's mechanical and electronic components can be severely damaged, rendering the vehicle unreliable.

Floods and hurricanes have the potential to wipe out dealerships in flood planes. Of course, many people are also dealing with flooded vehicles. If comprehensive coverage is chosen, insurance companies will cover flood damage.

Additional Reasons for a Car to Be Salvage

A vehicle can be titled as salvage for reasons other than major accidents or natural disasters. Other common reasons include:

• Kit cars: A salvage title on a kit car may indicate that it did not pass the inspection required to be properly registered or that it requires additional work.
• Restored antiques: If an antique has been properly restored, the seller should have a title. If the title is salvage, you may need to take additional steps to repair it (and keep the receipts for any parts you use).
• Stolen car returned after total loss payout: The vehicle may be in good condition, but the owner should have received a rebuilt title before selling it. In other words, do your homework before making a purchase.
• Major car repair with aftermarket parts: If you've had a vehicle repaired with aftermarket essential components, such as an engine, you may encounter issues with inspectors and insurers. For example, you might not be able to find a company to insure it. As with other situations, inspect the vehicle (or have a trusted mechanic inspect it) and obtain a history report.