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Buying a Car with a Salvage Title
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A salvage title indicates that a car has severe damage and is not roadworthy — so you typically shouldn’t consider a salvage title car as your next ride. There are affordable alternatives (like older vehicles known for reliability) that can provide economic transportation and are likely safer and less expensive in the long run. Still, salvage title cars could be useful in specific scenarios if you know their risks and possibilities.
What is a salvage title?
A car’s title is a legal form that tracks the ownership and status of a vehicle. It’s like a car’s birth certificate — and it’s every bit as important. You cannot sell or buy a vehicle without a title. A vehicle receives a salvage title when the insurance company declares it a total loss due to extreme damage or theft. State law requires that a car be declared salvage when the amount of damage a vehicle receives reduces its value by a large percentage. The exact percentage will depend on the state: For example, the threshold is 60% in Oklahoma and 80% in Oregon.
Some companies have been known to buy and sell cars across state lines to prevent vehicles from receiving salvage titles and thus sell them at a higher price. The National Motor Vehicle Title Information System (NMVTIS) is designed to help protect consumers from fraud and unsafe vehicles. You can use that website to confirm a car’s condition and history.
What is a branded title?
A branded title can tell you how a salvage car was damaged or how severely. Some examples are “junk,” “salvage” and “flood.” They are specific designations and can differ from state to state.
What is a reconstructed title?
A “reconstructed” or “rebuilt” title is a salvage title vehicle that’s been repaired and passed a state safety inspection. It is not a promise that the car will be problem-free.
Are salvage titles bad?
Here are the issues you may find with a salvage title car.
Safety concerns. A vehicle needs to be both safe and functional. Cars that have suffered major damage may have or develop major safety problems.
No warranty. Salvage title cars are no longer covered by the manufacturer’s warranty and very few extended warranty companies offer comprehensive warranty coverage at an affordable price. Any repairs you may need to do will be out of pocket.
Repairs needed now and later. The vehicle may need expensive repairs to start and resume functioning. Other types of damage may cause systemic problems in the near future. For example, chassis damage can cause suspension, tire and steering issues.
Financing may be more expensive. Very few lenders will issue an auto loan for a salvage title car. In a traditional auto loan, the lender uses the car as collateral — meaning they can repossess and sell the car if you don’t make payments. Because a salvage title vehicle isn’t worth much and is difficult to sell, it’s riskier for the lender. The best way to finance one is via a personal loan: An unsecured personal loan doesn’t use the car as collateral and is normally more expensive, with a higher APR.
Car insurance may be hard to find. You may not be able to find insurance coverage at all for a salvage car. Some insurers may be willing to offer the state-required minimum liability insurance for a reconstructed title vehicle.
Low resale value. When you’re done using a salvage title vehicle, not only will it still have the black mark of not being a “clear title,” it will be older with more miles on it. Even if you repair it and pass a safety inspection, the vehicle won’t be worth the same amount with a clear title.
What are salvage title cars good for?
Affordable transportation, if the vehicle is safe. If you have complete knowledge about what caused the damage, the title is reconstructed, the vehicle passes a mechanical safety inspection and/or a pre-purchase inspection, it may be good to use as inexpensive transportation. A cheap vehicle can have many uses:
What are affordable alternatives to salvage title cars?
Consider older vehicles from brands with excellent reliability ratings, such as Toyota and Honda. A 2012 Toyota Corolla with a clear title bought from a dealer has a Kelley Blue Book (KBB) Fair Purchase Price of $8,329. You could also look into getting a vehicle with a lower trim level — one that has fewer features — but can still get you from Point A to Point B safely. We recommend that you never pay more than what a car is worth according to industry guides like KBB and Edmunds. Here’s how to negotiate a car’s price down.
How do I buy a salvage title car?
Determine what damaged the car. Look at the vehicle history report and talk to the seller. Was the damage caused by a flood, a thief or a rear-end collision? When did the damage occur? It could be a good sign if the salvage title was issued years ago and the car is still going strong. Search the Vehicle Identification Number (VIN) in the National Motor Vehicle Title Information System (NMVTIS) to confirm the title status and vehicle history.
Get an independent mechanical inspection. Whether buying the car at a dealership or from an independent seller, get the vehicle inspected by an independent mechanic. Many mechanics offer pre-purchase inspections and can tell you not only the car’s health at the moment, but also when they’d expect the car to need potentially costly repairs in the future.
Pay with cash or a personal loan. Salvage title cars tend to be much more affordable than clear title vehicles. If you can afford to buy one for cash without financial stress, that’s great! But if you do need a loan, you’re not alone. Look for a personal loan from a credit union or an online lender, as they tend to have the lowest rates. You could fill out an online form at LendingTree and get up to five personal loan offers at once from lenders.