If you’re shopping for a car, you’ve probably visited multiple car lots, talked to dealerships, and even visited an auction. As many car buyers know, vehicles sold at auction come in all shapes, sizes, and conditions. But the most attractive feature of cars sold at auctions is price, especially salvage-titled vehicles. You may be tempted to buy such a car. But not knowing what a salvage title is can work against you. So what does this title mean and what are the pros and cons of buying one?
What is a Ransom Title?
So what does this title really mean? In simple words, a salvage title is issued for a vehicle that has been damaged and the insurance company assesses that it is better to pay the previous owner rather than cover the cost of repair. The criteria an insurance company uses to consider a car to be a total loss vary from state to state.
On average, if a car was damaged and the cost of repairs is 70 percent of the cost of the vehicle at the time of the incident, a total loss is declared and a claim is paid for it. However, this is an average threshold. In some states, it can be as low as 50 percent, as in Iowa, or even as high as 100 percent in states like Texas. In Michigan, for example, the car gets salvage title if the extent of the damage ranges from 75 to 90 percent.
But if the damage is assessed to be 91 percent of the pre-incident vehicle’s value, the car is given a junk title or what some states call junk titles.
How Does a Vehicle Obtain a Salvage Title?
The reasons for a vehicle to receive a salvage title vary. You could have had an accident, flood damage, or other bad weather conditions like hail. In some states, if a car is stolen and not recovered by the police within a certain period of time, that car is deregistered and the insurance company pays a claim for it. You may also find that cars that have been spray-painted or have broken windows and whose bodywork was damaged in an act of vandalism are canceled and turned into rescue vehicles.
But, it can be assumed from the thresholds and extent of damage even if some cars are given a salvage title, this does not mean that they cannot be repaired. Legally, you cannot drive a car with this title on a highway unless it goes through a recertification process and an inspection, which we will talk about later. However, this means that you can buy and drive a car with a salvage title, but there are things to look for and a process to follow before this is legally possible.
Buy Cars with Salvage Titles
Some estimates say that a car with a salvage title can be up to 75 percent cheaper than an equivalent used car with a clean title. This is great if you are looking for a lower down payment. Or if you are looking not to worry about a car loan, not having a loan with a private entity, or even if your credit card has no capacity. This is particularly good for people with low credit scores.
There are many factors that determine the value of the car and if this difference in price is really worth it. You should be aware that the vehicle needs repairs and recertification before getting back on the road. Therefore, it is important that you factor those costs into your calculations.
Where to find them
You will not be able to buy a car with a salvage title at your local used car dealer. Vehicles with these titles are often auctioned. Insurance companies put these cars up for auction to recover as much cash as they can with them. With the different thresholds for a vehicle to be awarded a title of this class, the cars put up for auction are in all kinds of conditions.
Some will take a lot less money and effort to repair. While others will require time, labor, and new replacement parts. Some cars finish in perfect condition with little or no damage. If you plan to sell your car, be sure to factor the cost of repairs into your budget. This will help you determine the resale value of the car.
Do the Research
When shopping for a salvage car at auction, you need to be prepared. Research plays a huge role when it comes to purchasing rescue vehicles. There are resources you can use to check your vehicle’s history. However, this may not show you the full and true condition of the car. Physical defects, dents and sags are easy to spot and often easy to fix. But if a car has suffered flood damage, you may not notice anything wrong.
It may have been cleaned to the point where you don’t see mold or anything wrong with the car. The problem can grow even more if you can’t start the car at the auction site. Flooded vehicles often have problems with electrical installations. For example, electronic devices may be out of place, but if you can’t test them, you wouldn’t know. If you cannot assess the condition of the car yourself, it is advisable to bring someone with you. A mechanic, or anyone who can inspect the car, can help you spot potential problems. You can even get an original repair estimate from the insurance company.
Additionally, auctions are an overwhelming experience, especially for a first-time visitor. The noise of the crowd, the speakers shouting numbers and recording the offers, the cars moving, all of this may be too much for a newcomer. In these cases, online shopping might be a better option. Not only can you avoid all the commotion, but there are also certain perks that you can take advantage of.
If you know what car you are looking for, here are some tips for buying salvage vehicles. First, shop online for the prices of the car you want. There are many resources for that, like Kelley Blue Book or Cargurus. Subtract about 50-75 percent from that value and that’s your target budget.
The Advantages of Buying Online
Your next step is to find a reputable website. For example, Auto Auction Mall has a huge database of salvaged vehicles for auction. The advantages of these websites are significant. You are assigned an agent with knowledge of the market. You have the opportunity to browse auction inventories more easily. Plus, you can customize your search to include just the vehicles with the safety features and options you need. You can review all the available details included in the listing and see the photos of the car.
You will have help with the offers, the purchase and the delivery of the car to your home. All of this makes car buying a more engaging experience compared to attending an auction in person. Additional resources are also available at your fingertips when browsing online. Kelley Blue Book is certainly a great resource, but there are also similar sites that you can check out.
Each vehicle listed for auction will include the VIN number that you can use to look up the full history. This can tell you what kind of life the car had in the past, and if it was serviced regularly. You can also find patterns of repairs and replacement parts that have failed more frequently throughout the life of the car. But your “fight” with a car that has a salvage title begins only after it is delivered to you, as this is where the recertification process begins.
Repairing a Rescued Car
A vehicle with a salvage title cannot be legally driven on the road unless it is repaired and recertified. The process begins with the repairs. Depending on the state, you can repair the vehicle yourself or you may need to hire a certified mechanic. Repairing a salvage car is a painstaking process. Take as many photos as possible of the repair process. Make a file and catalog with all the spare parts information. Keep all receipts for the parts you have purchased to use during the repair process.
Obtaining a Reconstructed Rescue Title
Once the repairs are completed, all states require that you go through the Department of Motor Vehicles and fill out certain forms. For example, in the state of Georgia, you have to use a licensed rebuilder for the repair process. But before painting the car, you need to inspect it. This can be done by state-certified private inspectors or at certification stations. You have to tow the cart to the inspection station. Some private inspectors will come and complete the inspection for you. Important: Each state has different rules when it comes to rebuilding cars. Be sure to follow the correct guidelines by choosing your state from our list of Rule Guides for Rebuilt Titles.
Documents and Photographs
For example, in Georgia, a certified rebuilder will submit a request for a rebuilt motor vehicle inspection. If you live in a state where you can do the repairs yourself, you will be required to submit the Georgia equivalent of the T-22R form. Also, you will have to present all the required documents signed by you. They usually include an application for a tag / title, and certification for workmanship and parts, as well as the original salvage title.
The requirements vary from state to state, but these are the general documents that you must submit signed. Also, please provide all dealer photos, check vehicle historical reports to make sure no title wash. This happens when a rescue vehicle is moved to another state that does not recognize the rescue mark. So the car receives a new title that can hide its condition. This illegal move can significantly increase your resale value.
Rates and Insurance
If a private inspector inspects the car, you will have to pay an inspector fee.
Once you have passed the inspection, you can go and send all the documentation and materials to your local Department of Motor Vehicles, as well as the inspector’s report. You will also need to pay a state fee and a title fee. To avoid the private inspector fee, you can use the state inspection station.
However, the waiting time can be much longer. Insurance can be another issue when it comes to dealing with rebuilt salvage titles. Insurance companies are reluctant to provide liability insurance, let alone comprehensive insurance coverage on cars that have been canceled. The argument is that they have no way of knowing if, should you file a claim with a rebuilt salvage title, the damage suffered is new and not the damage that gave the car a salvage mark in the first place.
However, there are ways to work with insurance companies. This is where all the certification, inspection, and documentation can come in handy. Some car insurance companies may refuse to deal with you directly, while others may give you a quote. The downside is that the premium will be higher than usual.
The next step is to compare the quotes from different auto insurance companies. You can then use your documentation to show that the car has passed a state inspection.
Also, some insurance companies will check your car with a certified contracted inspector. You may get a quote that won’t leave you feeling scammed. This is where the recertification process ends. You can keep the car or sell it if you see a profit on the deal.
Ransom Title Considerations
You can get several key points from this article. Salvaged vehicles have suffered damage that causes insurance companies to cancel them. Some could have been stolen and recovered after the claim was paid by the insurance company. Some of these cars are in great condition, or little damage with minimal repair cost. One of these could be a perfect car to save some money.
Salvage title vehicles, for those who know cars, are a good way to get a cheap car.
Then you can fix the car and use it for daily transportation. Alternatively, you can sell the car for a profit. If your title renewal and repair costs stay below the price of an equivalent clean title vehicle, it’s a good deal. Make sure you know what you are buying. This should minimize the possibility of disappointment and maximize your savings. Salvage title cars can be a great way to buy used cars cheaper than what you would pay at a dealership.