10 Reasons a Car Might Have a Salvage Title

When someone mentions that a car was totaled, do you picture a massive accident that disfigures the vehicle? In reality, the accident that totals a car may leave it strikingly undamaged.

Insurance companies will consider a vehicle totaled if the cost to repair it after an accident exceeds a certain percentage of its value. Many states specify standards for this valuation, though for many insurance companies, the standard limit is 75 percent of the vehicle's total value. In this situation, the insurer sees replacing the vehicle as a more financially wise option than repairing it [source: Carfax].

A salvage title should, first and foremost, be a warning flag that a car may have been damaged in an accident. The plastic body panels and high-tech components that go into today's cars can mean that even a small accident might lead to very expensive repairs. An accident could also cause subtle -- but irreparable -- damage to the car's frame or other critical parts.

Insurance companies may be more likely to repair a car if they choose to use alternative parts -- components from manufacturers other than the one that built the car. While the quality of these parts is supposed to equal that of the original vehicle, it's worth investigating how a car was repaired if it was ever in an accident. If the car was totaled and you're in the market for a fixer-upper, you owe it to your safety -- and that of your future passengers -- to thoroughly understand the extent of the damage, to determine if it's within your ability to repair.

According to 2010 statistics, a car is stolen in the U.S. every 33 seconds [source: Neff]. Insurers often act quickly to help their clients get back on the road after a theft, which leads to the second reason the car of your dreams may have a salvage title: It was recovered after being stolen.

Not every car that gets stolen ends up with a salvage title. If the car is recovered quickly, the police may simply return it to the owner. In cases where the car is not recovered for weeks or months, the insurance company may have already replaced it for the owner. In essence, the insurance company writes off the original car as a total loss. The car, when recovered, is then titled as if it had been written off due to a totaling accident.

A car given a salvage title for a non-damage reason can often have the title changed to a rebuilt title, a designation that then allows the owner to operate it legally on the street. Often, this simply requires a state inspection for safety, although the details of the inspection and re-titling process vary from state to state [source: Salvage Title Cars].

If you're interested in a car that has a salvage title, and the owner claims it was stolen and recovered, find out why the car hasn't been re-titled yet. The owner should have done this before offering the car for sale as a matter of good business; failure to do it may be a sign that there's something else wrong with the car.

Widespread natural disasters like earthquakes and hurricanes wreak havoc on vehicles. A car tossed on its roof by a massive temblor is going to sustain a fair bit of damage, as is a car that spends a day half-submerged in a hurricane. The demand on insurers to evaluate these vehicles can overwhelm the insurance system; even though the vehicles are often supposed to be pulled from circulation due to the damage, they can slip through the organizational cracks -- whether through fraud or a simple honest mistake -- and end up on used car lots.

The salvage title is a safety device in these situations: A person trying to sell a flood-damaged car with a salvage title may face tough questions if he or she tries to sell the car and claim its title came from a theft or other non-damage reason. But water damage can be hard to detect in a vehicle that has been thoroughly cleaned, and it's all too easy for an unscrupulous seller to profit by selling a flood-damaged car to an unsuspecting buyer.

If a car appears to be clean, safe and undamaged, but has a salvage title and comes from a flood- or hurricane-prone region, be wary of flood damage. Checking the history of the vehicle using its vehicle identification number, or VIN, is a effective way to find out where it has been licensed and if it has been damaged [source: Lease Guide].

This reason for a salvage title is very similar to the previous one, and should prompt you to inspect the car for flood or water damage. But in certain situations, cars that were on a dealer's lot during a natural disaster may be given salvage titles, even if they weren't damaged to the point of salvage.

Imagine a scenario where a car dealer has a lot on a hillside. A flood tears through the area, submerging the lower half of the lot and ruining the cars parked there. When the insurance inspector arrives to evaluate the damage, she sees a lot filled with hundreds of cars: The half in the lower lot sustained various amounts of damage, while the ones at the top of the hill were untouched by the flood. Depending on the number of vehicles involved, she may decide to write off the entire lot, rather than incurring the cost to inspect every car, repair the slightly damaged ones and total the ones damaged worst by the flood [source: Lease Guide].

The undamaged and less-damaged cars caught in these dealer stock write-offs can present deals for buyers willing to do research into what happened to cause the write-off. Buying a car involved in one of these write-offs, repairing it and getting it a rebuilt title could possibly be less expensive than buying a model with a clear title.

But dealer stock write-offs are not free tickets to cheap cars. Insurance may be higher on cars with rebuilt titles, and it could take a great deal of research to determine what happened to the dealer's lot, and if the car in question was truly an undamaged car caught up in a broad-brush insurance decision.

The designation of a salvage title for a vehicle doesn't necessarily mean it's headed for the scrap heap. Some states label salvage-titled vehicles as "repairable" or "irreparable," designating whether they can be rebuilt and re-titled, or they must be used for parts or recycled [source: QuinStreet Insurance Agency Inc.].

When a vehicle with a salvage title can be safely repaired, the licensing state will often issue a rebuilt title after the vehicle passes a safety inspection. These inspections vary widely from state to state, so it's smart to check your state's regulations before considering a salvage-to-rebuilt vehicle project.

If you're considering buying a vehicle that has a salvage title but appears to have been restored, find out why the owner didn't have it re-titled. The answer could be as simple as a misunderstanding of title laws, or it could indicate the owner is trying to hide something about the car.

In some states, a car may receive a rebuilt or salvage title if its owner has replaced a substantial component with an aftermarket part. The parts in question are often large items that the car requires to run properly, like the motor, cowling, floor pan or other substantial part of the bodywork.

An aftermarket component in the car of your dreams may not be a bad thing; if you're a car enthusiast and want a car with certain upgrades, it may even be a major selling incentive. But aftermarket components can carry risks for car buyers: Some could affect the car's insurability, while others could impact its safety.

Some insurance companies don't like to assume the risk that comes with a car modified to go excessively fast, or altered to perform in a way other than it was intended to by design. This could mean substantially higher insurance rates for your dream car. Alternately, states that test car emissions may forbid a car from being registered if it has aftermarket engine components that allow too much noise or greenhouse gas emissions. And components installed by the car's current owner may only be as good as that owner's mechanical skills -- you should understand the modifications well enough to determine if the owner installed them properly before you even think about buying the car.

Have you ever walked up to admire a seemingly rare, classic or exotic car, and suddenly noticed that the details didn't look quite right? It's very possible you were looking at a kit car.

Car enthusiasts with strong mechanical skills have been building replicas of rare and classic cars for years, and an industry of component manufacturers supplies all the parts they need to build their own Porsche Speedsters, Shelby Cobras and roadworthy versions of classic Le Mans racers. Kit car builders often pick and choose components for their cars, customizing them to their unique tastes.

Titling kit cars, however, can present some unique challenges. Like salvage-title cars, component-built cars often must pass state inspections to receive roadworthy titles and registration. And while a salvaged car may be inspected for safety, a kit car is often also inspected to ensure none of the parts on it were stolen [source: Ohio Department of Public Safety].

If you're planning on buying a kit car, a responsible seller will have already taken care of the inspection and had the vehicle properly registered. If the car has no title -- or worse, has a salvage title -- suspect that there may be something amiss, and start asking questions.

One of the restrictions on salvage-title cars in most states is that they cannot be legally operated on the road. Some states go one step further, declaring certain salvage-title cars as being too damaged to rebuild. These cars can only be sold for parts.

This is a situation where a savvy home mechanic could obtain useable parts for a bargain price. If you have a vehicle you repair yourself, and you have the space and tools necessary to stockpile, clean and organize the parts, buying a "parts car" can provide a cheap source of parts -- especially if your car is older, rare or no longer supported by manufacturers' parts suppliers.

The drawback to buying a salvaged car for parts comes when you complete the sale. In some states, only licensed rebuilders can purchase salvaged cars. Check your state's laws before making a purchase [source: QuinStreet Insurance Agency Inc.].

If you can purchase the salvage-title car, think before you act: How will you get it home (it's not licensed, so you can't drive it)? Do you have room to store it without violating any "junk car" ordinances in your community? Do you have the tools, time and knowledge to disassemble it, and do you have a plan to store the parts until you need them? Thinking through these questions is important, to ensure your parts car doesn't become a useless eyesore if it's stored incorrectly in the wrong place.

Sometimes a person falls in love with his or her car to the point where, if it's damaged in an accident, he or she would rather keep it than have the insurer total it and help pay for a new one. Some owners may do this to avoid filing excessive claims with their insurers, or because they feel they can get a better price for the damaged vehicle by selling it themselves. Depending on how the insurer-owner agreement is arranged, this may result in the car receiving a salvage title.

When considering buying a salvage-title car with this kind of backstory, evaluate the situation like an insurer. How bad is the damage? Can the car be made roadworthy at reasonable cost? Is the owner telling the truth about the vehicle's condition? An owner who waives a totaled-car claim may ask an unreasonably high price for the vehicle, so be prepared to negotiate if you want the car, feel it's worth the effort to make it roadworthy and believe you can offer a fair price for it [sources: Carfax, Ohio Department of Public Safety, Connecticut Department of Motor Vehicles].

A collector car often comes with a unique story. The owner may have found it rotting away in a barn, or discovered a rusted shell in a field and nursed it back to life over years of hard work. These stories add to the charm of these old vehicles, but they can also open the door to title problems.

Quite often, a restored classic parted ways with its title long ago. Even if the original title is intact, there's a good chance that the car was restored using major components, such as the body, motor or transmission, from multiple vehicles. The car could face additional regulations, depending on your state's laws concerning classic and restored vehicles.

One valuable rule of thumb to use when buying or restoring an old vehicle is to obtain bills of sale for every major component you purchase: the body, chassis, motor and major subassemblies. These bills will show collective proof of ownership for the vehicle when you take it to be registered. In addition, learn about your state's laws concerning restored vehicles. There may be a process in place that saves you the trouble of chasing down a title, undergoing an inspection and having a new title issued. This is a case where a little research can shorten the time until you're enjoying the open road in your new pride and joy.

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