A salvage title is a legal document issued by the Department of Motor Vehicles (DMV) if an insurance company deems your car a total loss. Vehicles with a salvage title are often cheaper since they need extensive repairs to be considered roadworthy again. That can be advantageous for those looking for cheaper deals.
An auto loan can help you finance a salvage title car, but depending on the state, it may be challenging to get. Other ways to finance a salvage title car include paying in cash, getting a personal loan or opting for dealer financing.
Financing a salvage title car may seem daunting, but it doesn't have to be. Learn about your options and make an informed decision that fits your budget and lifestyle.
Having a salvage title on your car is an official indicator that your car has been totaled or has received significant damage in the past.
Getting an auto loan for a salvage title car can be challenging, as lenders may not want to take on the risk of financing a car with a history of damages or repairs.
If you’re buying a salvage title car, it’s important to have the vehicle inspected by a trusted mechanic and to consider the risks and costs before making a purchase.
What Is a Salvage Title?
A salvage title is a designation given to a car when it’s declared a total loss by an insurance company. It’s often given when the cost of repairs exceeds the vehicle's value, but the overall requirements to get a salvage title can vary by state. For instance, in Iowa, a salvage title is given if the cost to repair the vehicle is greater than 70% of the car’s fair market value. On the other hand, in California, if the cost of repair and the total salvage value is higher than the car’s actual cash value, it’s deemed a total loss.
Once your vehicle is deemed a total loss, you or the insurer will contact the Department of Motor Vehicles (DMV) to have a salvage title issued.
When a vehicle has a salvage title, it typically loses a significant amount of its value. Kelley Blue Book notes that the price could be deducted by 20% to 40%, but the actual value will depend on a private appraisal.
Apart from a salvage title, some cars may also have a branded title. This indicates that it can function but has a major issue or concern, such as having a defect or issues with the odometers, but the issue is not quite as major to deem it a salvage title. There are also rebuilt or reconstructed titles, which indicate that the vehicle was once a total loss but has been rebuilt and repaired enough to become roadworthy.
Depending on the state, there are different requirements when it comes to disclosing car damage on a salvage title. Most states require sellers to disclose any previous damage or repairs to potential buyers, but the level of detail required and the specific disclosures vary. In some states, sellers are required to provide a written disclosure statement, while in others, a verbal disclosure statement is sufficient. Ensure that you are complying with the laws in your state by checking the requirements.
Pros and Cons of Getting a Salvage Title Car
Purchasing a salvage title car has its fair share of advantages and disadvantages. While it ultimately depends on your circumstances, it’s important to have an overview of the pros and cons to determine whether it’s worth the risk.
Benefits of Buying a Salvage Title Car
Because a salvage title lowers the value of a car, it grants you more affordable car options that might have otherwise been difficult to get.
Just because a car is being sold with a salvage title doesn’t automatically mean it will be difficult to manage. Some vehicles may still run well after repairs and can last with minimal maintenance for years.
Vehicles with a salvage title might have functioning parts that you can use for other cars, or you may even have the opportunity to restore the car.
Risks of Buying a Salvage Title Car
Since salvage title cars have a higher level of risk, traditional auto loan lenders are often hesitant to provide financing for such a vehicle. Even if it is available, the terms may be less than favorable.
Sellers of salvage title cars may not be completely transparent about any damage. That can lead to higher unexpected costs for repairs.
Salvage title cars often have other issues that may only become apparent with time. These issues may require more extensive repairs down the line or compromise the safety and condition of the car.
How to Get an Auto Loan for a Salvage Title Car
Securing an auto loan for salvage title cars can be more challenging than doing so for a car with a clean title. Lenders view a salvage title car as high risk, thanks to the history of damage and repairs, making them unlikely to provide financing. That said, finding an auto loan for a salvage title car is not impossible. It simply may require more shopping around to find a suitable provider.
Nevertheless, it’s important to be wary of lenders. Some lenders may offer deals that are too good to be true or have costly upfront fees — all in an effort to scam you. So potential loan applicants should make sure to carefully research the lender’s reputation, compare interest rates and fees and look at reviews for any signs of a scam.
If you are approved for an auto loan for a salvage title car, expect less favorable terms, such as higher interest rates, shorter loan terms or higher down payments. Lenders may do this to hedge against the risk of financing a salvage title car, but it will still depend on the unique circumstance of your application.
Steps to Buying a Car With a Salvage Title
Buying a salvage title car involves more steps than purchasing a clean title car. Prepare yourself for the car-buying process by learning the steps ahead of time.
Look into the vehicle’s history
Carefully examine the history of your desired car. The seller should typically provide this, allowing you to review any accidents, damage or other issues that may have led to the salvage title. You will also want to take note of any repairs done to address the damage. That way, you know what needs to be worked on should you purchase it. The National Motor Vehicle Title Information System (NMVTIS) is an excellent resource to confirm the car’s status using its Vehicle Identification Number (VIN), as it’s designed to protect you from fraud or unsafe vehicles.
Get a mechanic for inspection
Honest sellers will allow you to get a third-party mechanic to inspect the vehicle. Having a salvage title car inspected by an independent mechanic can help provide you with peace of mind that everything is working fine and identifies any problems listed or unlisted by the seller. This is especially important if you aren’t familiar with autos.
Take out an auto loan
If you need financing to purchase a salvage title car, it’s important to shop around. Remember that auto loans for salvage title cars may have higher interest rates or terms, so comparing quotes from several providers is recommended. You can also consider taking out a personal loan or saving up to buy a salvage title car with cash.
FAQs About Buying a Car With a Salvage Title
Buying a salvage title car is an affordable option — but it comes with risks. Learning more about the process by reviewing the answers to frequently asked questions can help you better understand those risks and determine whether this path is right for you.
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- Kelley Blue Book. "Frequently Asked Questions." Accessed March 10, 2023.
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