How Does a Car Become Salvage?

Before you purchase a salvage title vehicle, you should know what you're getting yourself into. Salvage title vehicles have been damaged beyond their market value and been declared a loss by an insurance company.

The most common way a vehicle becomes salvage is by being involved in a major accident or natural disaster. But in some states, a car can also get a salvage title if it was stolen and never recovered by the police. All of these reasons should raise red flags, and you should proceed with caution.

Here are some common reasons a vehicle becomes salvage-titled.

Major Accidents

If you're involved in an accident, and your car is declared a total loss by the insurance company, you can keep it and have it repaired—but your provider will declare it a salvage vehicle. The accident may not be significant, but the car could still be damaged beyond its value. This often happens with older vehicles that may not be worth much at the time of the accident.

Even a new vehicle can be turned into a salvage vehicle after a severe accident. If the insurance carrier does not think repairing the car is worthwhile, someone else may be willing to take on the job. But once an insurance carrier says it's not worth repairing, it will be issued a salvage title even if you have the repairs done.

If you want to remove the salvage title by repairing the vehicle, it will have to undergo a rigorous inspection before you're allowed to drive it on public roads. The inspection includes reviewing your receipts for all the parts you or your mechanic purchased to rebuild the vehicle. If it passes inspection, it will then be declared a rebuilt salvage title. 

Each state has criteria for what makes a vehicle a total loss. Most states consider a car that is in need of repairs that would cost 75% or more of its total actual cash value to be a salvage.

It’s also worth keeping in mind that just because a car looks like it’s good as new on the outside, that doesn't mean everything is functioning correctly on the inside. If it has a salvage title, it's probably for a reason.

Natural Disaster

Flooding is another reason a vehicle may get a salvage title. Many times, the damage is not visible at all to a buyer. The water dries up and leaves little evidence behind. However, the mechanical and electronic parts of a vehicle can be severely damaged, leaving the car unreliable.

Dealerships in flood planes are at risk of losing their entire lot due to floods and hurricanes. Of course, many individuals have to deal with flooded vehicles, too. Insurance carriers will cover flood damage if comprehensive coverage is selected.

Additional Reasons for a Car to Be Salvage

It's not just major accidents and natural disasters that can cause a vehicle to be titled as salvage. Here are other common reasons:

• Kit cars: A salvage title on a kit car may mean that it never passed the inspection needed for it to be correctly registered or that it needs additional work.
• Restored antiques: If an antique has been properly restored, the seller should have a title. If it's a salvage title, you may need to take additional steps to repair it (and keep the receipts for any parts you use).
• Stolen car returned after a total loss payout: There may not be anything wrong with the vehicle, but if that's the case, the owner should have received a rebuilt title before selling it. In other words, do your due diligence before buying.
• Major car repair using aftermarket parts: If you've had a vehicle repaired with essential components that are aftermarket, such as an engine, you might run into some problems with inspectors and insurers. You might not be able to find a company to insure it, for example. As with other situations, inspect the vehicle (or have a trusted mechanic inspect it), and get a report of the vehicle's history.

Frequently Asked Questions (FAQs)