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The Dangers of Purchasing a Salvage Title Vehicle

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If the term “salvage title” stops you in your tracks, you’re not off base.

Salvage title cars attract some buyers because they’re priced significantly below market. They might seem like a bargain, but ultimately they have a lot of risks.

Salvage title cars might represent opportunities for a select group of buyers, but even then, the cars should be viewed with caution — and most buyers should avoid them altogether. Here’s everything you need to know:

Understanding Salvage Titles

A vehicle receives a salvage title when it’s damaged so severely that the insurance company declares it a total loss. Depending on your state’s laws, this occurs when the car’s repairs would cost 50% to 90% of its pre-crash value.

“The reasons for the salvage title vary. It could be the result of flood damage — which, even though cosmetically repaired, could lead to mold issues later — a repair after being totaled in an accident, hail damage, smoke damage from a fire. … The reasons are many,” says Matt DeLorenzo, managing editor at Kelley Blue Book.

The risks

There are many drawbacks to buying a salvage title car. The biggest is that you might not know the extent of the damage that caused it to be declared a total loss. There are also other factors to consider:

Safety: There are reports of salvage car rebuilders using money-saving tactics that cut safety corners, such as installing faulty transmissions or seat belts. For example, in a case settled in 2009, the family of Bobby Ellsworth was awarded millions after the California teen lost his life in a crash because a body-shop owner had faked the installation of airbags.

Fraud: Many people selling salvage title cars claim the damage was minor and cosmetic, but it can be hard to know who’s telling the truth. And there’s little the buyer can do if the car turns out to be in poor condition. “The seller may provide documentation that there have been repairs. However, the salvage title also implies an as-is sale,” DeLorenzo says. “There are no warranties or guarantees on the condition and no legal recourse if the seller has disclosed the salvage title.”

Difficulty insuring or financing: Most car insurance companies offer only limited coverage for salvage title cars — or refuse to cover them at all — since it’s so hard to assign them accurate values. Banks also look at salvage cars as a risk and rarely provide financing for them.

No resale value: Dealerships almost never accept salvage vehicles as trade-ins, and private sales can be just as difficult. Salvage cars can’t be valued accurately by online pricing guides such as Edmunds or Kelley Blue Book, making it hard to convince buyers of a reasonable price.

If you decide to move forward with purchasing a salvage vehicle:

Ask a mechanic you trust to perform a full inspection: Don’t rely on the current owner’s description of the mechanical condition.

Get a vehicle history report: It might have additional information about the incident that led to the salvage title.

Learn as much as you can about its damage: Ask the seller for repair records and estimates or speak with an employee of the body shop that did the repairs.

Find out how long ago the salvage title was issued: If it was issued years ago and the car’s been driven consistently since, the repairs apparently were adequate. If the accident or damage occurred recently, there’s greater uncertainty.

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