What is a salvage title?
A salvage title, sometimes called a salvaged title, is a type of car title for cars that have been involved in a significant accident or incident and must be repaired before they can be driven on the road legally. This special type of title is intended to provide important vehicle history information to a buyer before they finalize a purchase. Essentially, the purpose of a salvage title is to prevent vehicles from being sold to unsuspecting buyers without disclosing that something has gone awry in the past and the car will need repairs. The Department of Motor Vehicles (DMV) applies a salvage title to a vehicle, typically after an insurance claim that results in the vehicle being declared a total loss.
Some incidents that may result in a salvage title are obvious, such as when a vehicle has been involved in a major collision or has caught fire. Others are less obvious, like when law enforcement recovers a stolen vehicle or a vehicle has been heavily vandalized. Other incidents that can result in a total loss declaration by an insurance company include floods, hailstorms, or tornado damage, theft of critical parts, or damage that would result in repair costs in excess of the vehicle’s value.
Can you drive a salvage title vehicle?
Once a vehicle has received a salvage title, it cannot be driven on the street until it has gone through a process to get a rebuilt title. This is true whether states have lax inspection laws (like Alabama and Florida) or tougher laws (like Massachusetts and Rhode Island). However, the specific laws that dictate the process for registering the vehicle vary by state or even county.
Some vehicles are damaged beyond the point of being repaired. In these cases, the vehicle may receive a non-repairable title, which is also known as a junk title. Once a vehicle receives a non-repairable title, it is impossible to repair it and register it for use on the street. This is essentially the end for the car, and these can only be used for parts or sold for scrap at that point.
What legal risks do you have if you buy a car with a salvage title?
First and foremost, driving a vehicle with a salvage title can put you at serious risk should anything go wrong. You may be held liable for damages if you are involved in an accident. Even if the accident is not the fault of the driver of the salvage vehicle, serious consequences are possible. Depending on the laws where you live, you could receive a ticket or face more serious legal trouble, such as the loss of driving privileges. Salvage vehicles usually cannot be registered for use on the road, so the risk of being pulled over by police and receiving a citation is high.
Automobile insurance companies do not offer liability policies for vehicles branded with a salvage title. All but one state requires drivers to have automobile insurance to cover the vehicle they drive. New Hampshire, the “Live Free or Die” state, is the exception, requiring drivers to have sufficient funds to cover any damages if they choose to forgo insurance coverage.
Registering a vehicle to be legal to drive in any state with a salvage title is impossible until the DMV issues a rebuilt title. This law is in place to prevent people from driving unsafe vehicles. Some causes of salvage titles, such as hail damage or vandalism, have little impact on the ability to operate the vehicle safely, in which case it can be quite straightforward to acquire a rebuilt title, at which point the vehicle can be registered, then driven.
Banks are unlikely to issue a loan to purchase a salvage vehicle since the vehicle’s actual value is difficult to determine. In most cases, a vehicle with a salvage title has a value that is up to 40% lower than the same vehicle with a clean title. A vehicle with a rebuilt title might be worth 20% less than the same vehicle with a clean title and may also be difficult to finance.
Many people who purchase a salvage vehicle find out the hard way that repairing one can be prohibitively expensive. Vehicles involved in accidents often have significant damage to their frames, which are designed to crumple to absorb impacts. Repairing this type of damage is rarely easy and almost always extremely expensive. The same is true for vehicles involved in floods and fires that have damaged wiring, electronics, and other components that can cost far more than the vehicle is worth to repair. Before hiring a repair shop to fix a salvage vehicle, consider drafting an Auto Repair Contract that stipulates the terms of repairs you are willing to pay for in order to prevent cost overruns and unnecessary repairs.
Buyers often find that vehicles with a salvage title are not worth anything. When a car cannot be repaired, its value in parts or scrap make any investment in these vehicles a serious risk. You can even get fines and tickets for parking salvage vehicles on the street since they cannot be registered. This means you may want to have a garage or storage area to keep the car in while waiting for the rebuilt title. Keep in mind that some garages or automobile storage companies are unlikely to store an unregistered vehicle.
How can I avoid buying a salvage title car?
Reputable dealerships are less likely to try to sell a salvage car without disclosing its title status. In most areas, the dealership bears responsibility for verifying all titles of vehicles they sell. Sometimes, vehicle owners may sell a vehicle without a title, often stating they lost the title, which leaves the responsibility up to the new owner. Many states allow a vehicle to be sold with nothing more than a Bill of Sale. Once money has changed hands, there is very little you can do about it, and you may be stuck with the vehicle. One option you have is to consult the National Motor Vehicle Title Information System, which provides useful information about a vehicle’s history.
The first step to take is to ask to inspect the vehicle title. In most states, a salvage title is indicated clearly on the title. You may want to know about numerous other conditions, including rebuilt titles, former police or taxi vehicles, and vehicles returned due to lemon laws. It is also important to ensure that the person selling the car is actually the owner. You can protect yourself with an Affidavit of Ownership, which provides a paper trail to prevent unlawful vehicle sales.
Services can provide a detailed history for many vehicles using the VIN number. The information may include any insurance claims, whether the car was used in a rental fleet, or leased, the number of times the vehicle has been serviced, or had a smog check performed, and the dates and locations the vehicle was sold.
If you are buying a car with a salvage title and planning to repair it, hire a licensed mechanic to inspect the car before purchase. A mechanic can identify issues that may not be obvious, which could lead to massive repair bills or render the car unrepairable.
Unfortunately, many people find out too late that the car they purchased has a salvage title, or what that actually means. If laws have been violated in order to disguise the fact that the car carries a salvage title or another branded title, you may have legal recourse that can help you recover some or all of your money. If you have more questions about buying a vehicle with a salvage title, or through a private party, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.