What's A Salvage Title, And Should You Buy A Car With One?
Something nobody tells you when you go to buy your first car is that it's never quite as simple as rolling one off the lot, especially if you're buying used cars with some history. You never know exactly what a used car has been through beyond what a seller is willing to tell you, and that might not always be the full story. However, there is one piece of documentation that can give you a very good idea of what a car has been through and whether or not you should buy it: a salvage title.
A salvage title is a special kind of vehicle document that, in the simplest possible terms, indicates the car in question has little-to-no value. If you're looking for a bargain on a used vehicle, discovering a car with such a document could feel like a major victory. After all, if the car's nearly worthless, surely it'd be dirt cheap! However, a car doesn't get a salvage title just because it's cheap. It has it for a reason, and in many cases, it's a bad reason — one that you won't want to pay to put up with.
A salvage title indicates that a car has very little monetary worth
Salvage titles are issued to a car directly by the Department of Motor Vehicles (DMV) when the car has lost the vast majority of its usual market value, typically between 60 and 100%. As you may expect, a car typically won't lose the vast majority of its value for a pleasant reason. In the best-case scenario, a car may have a salvage title if it was used for business purposes, such as a private taxi or a police car. A car may also have a salvage title if it was returned to the manufacturer under warranty.
More often than not, though, a car will usually get a salvage title slapped on it if it was severely damaged in an accident. Whether it's a collision, a flood, a fire, or whatever else, if the car is damaged beyond the point of safe operation, it's getting a salvage title. Cars can also get salvage titles if they're stolen and have their parts chopped, or if they're vandalized.
When a car is severely damaged, an insurance company will determine if it's still in a drivable state. If it doesn't make the cut, the insurance company will have the DMV issue the document. At this point, the car won't even be legal to drive on the road until it's been rebuilt and recertified by a state inspector, though the salvage title won't go away even if it is repaired.
Cars with salvage titles are cheap, but may have problems
When a car has a salvage title, either its owner or their insurance company will sell it off in an effort to recoup costs. Since the car has had its value utterly decimated, it's probably going to be pretty cheap. This could be appealing if you're looking for a budget starter car, but you might want to think twice.
For one thing, salvage title cars are ineligible for auto loans. If you want to buy one, it's cash up front. It's a purchase, not an investment. This can be a bad move from a financial perspective, as banks won't exactly be eager to finance cars with that kind of history, nor will insurance want to cover it. As opposed to a new car or used car in good quality, you probably won't be able to sell a salvage title car when you want to upgrade.
On a more practical level, even if a salvage title car has been rebuilt to legal standards, it might not be in the best condition. It could be missing vital safety features like airbags, or develop potentially expensive problems later down the line. Ideally, there will be extensive documentation available detailing how exactly the car was damaged and the rebuilding process, but it's on you to know what you're taking possession of.