What Is a Salvage Title and Should I Buy a Car With One?

If a car has a salvage title, you may be better off steering clear of it.

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

These cars might be great opportunities for a specific type of buyer, but even then, they should be viewed with caution — and most buyers should avoid them altogether. Why? Because they may be repaired haphazardly, are more difficult to insure and finance, and are hard to resell.

A vehicle receives a salvage title when an insurance company declares it a total loss, warning future buyers that there was a significant problem.

Vehicles are usually marked a total loss when a vehicle is damaged so severely that, financially, it doesn’t make sense to repair. Generally, this occurs when the cost of repairs would be 60% to 100% of the car’s pre-crash value, depending on the state. (Insurers may use their own total loss formula that differs from these percentages.)

Cars can get a salvage title for many reasons, including:

• An accident.

• Water or flood damage, smoke damage from a fire, or hail damage.

• A theft where the car was recovered after the claim was paid.

If a car has a salvage title, you can’t legally drive it on the road. So why would anyone want to buy one?

People who recommend buying a salvage-title car usually are referring to cars with a rebuilt title. Also known as revived or reconstructed titles, rebuilt titles are issued when a salvage-title car has been repaired and passed a safety inspection. These vehicles then can be insured and driven again. Because a rebuilt title indicates the car has salvage history, the terms are sometimes used interchangeably.

Regardless, buying a used car with salvage history can be risky, and conventional car-buying wisdom recommends looking elsewhere. If you’re not familiar with cars, it may be safer to stick to those that have a clean title, meaning the car has never been declared a total loss.

Safety concerns

For most people, the biggest issue with buying a car with salvage history is safety. You might not know the extent of the damage that caused it to be declared a total loss, and if it has a rebuilt title, the repair work could have been done improperly.

Be wary of water- or flood-damaged vehicles, as well. It can take months or years for problems to manifest.

Potential fraud

Someone selling a car with a rebuilt title can say the original damage was minor and cosmetic, but that information can be hard to verify, even if they show you documentation that repairs were made. And if the car turns out to be in poor condition, you’ll have little to no recourse.

Used cars are generally sold as is, meaning you understand there could be known and unknown issues. You could sue the seller, but you would have to prove that you were deliberately misled. That can be extremely difficult, especially if the seller disclosed the salvage title.

Difficult to insure or finance

Most car insurance companies offer only limited coverage for rebuilt-title cars — or refuse to cover them at all. Banks also look at cars with salvage history as a risk and rarely provide financing for them.

Hard to resell

It can be difficult to find a dealership that will accept a vehicle with salvage history as a trade in. Those that do will likely offer you significantly less compared to the same model with a clean title. Private sales can be just as difficult.

Cars with salvage or rebuilt titles 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.

Save money

These vehicles are priced significantly below market — typically 20% to 40% less, according to Kelley Blue Book — so it’s possible to find great deals. However, every vehicle’s salvage history is different, so make sure to get a private appraisal to determine the market value.

Find a diamond in the rough

There are times when a salvage-title car is only slightly damaged but still being sold for a low price. A hailstorm might damage the body but leave the engine and interior untouched. Older model vehicles might have lost market value to the point that they're declared totaled, even if they require only small repairs. Cars recovered after being stolen might receive a salvage title without ever having been in an accident.

A source for parts

Some people buy salvage-title cars to use as a "donor car" for parts. Others enjoy fixing up the salvage-title car themselves. If you buy a fixer upper and plan to drive it, don’t forget to factor in any associated costs with getting a rebuilt title, such as the inspection fee.

Given the pros and cons of buying a car with salvage history, the pool of ideal buyers is small. It includes buyers who:

• Have enough mechanical knowledge to inspect the car and possibly fix repair issues.

• Know the seller and have complete knowledge of what caused the salvage title.

• Plan to keep the car so long it fully depreciates, making resale a non-issue.

• Need a second car that's rarely used, perhaps for a vacation home.

• Can’t get a loan and have to pay cash for a car. Buying the right salvage-title car will allow them to drive more car for less money.

If you're determined to buy a car with salvage history despite the risks, take these steps to ensure a safer purchase:

Tips for inspecting the car

• Ask a mechanic you trust to perform a full vehicle inspection: Don’t rely on the current owner's description of the mechanical condition. Be sure to ask the inspector to look for frame damage that could alter the alignment of the car.

• Get a vehicle history report: It might have additional information about the incident that led to the salvage title. Avoid cars where the report shows it was towed from the scene or where the airbag was activated. These both indicate a more serious accident.

• 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. Request photos of the car showing the damage before it was repaired, or search for them on Google by looking up the car’s vehicle identification number, or VIN.

• Take it for a test drive: Push every button and turn every knob. Take the car on the freeway to make sure it tracks straights. Find an empty road and hit the brakes hard.

• Find out how long ago the rebuilt 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.

Tips for financing and insuring the car