Buying cars from insurance companies allow drivers on a budget to obtain a vehicle at an affordable price. However, vehicles owned by insurance providers are usually totaled by previous owners. Often, these cars end up getting sold at auto auctions rather than through dealerships and other traditional routes.
What Is a Salvage Vehicle?
A vehicle receives a salvage title in place of the regular title when the insurance company declares it a total loss. This occurs when the vehicle is badly damaged and needs repairs that exceed the total-loss threshold. Every state uses its own total-loss threshold, which is measured as a percentage of the original value of the vehicle.
With a salvage title, the car does not hold the same value as an identical model without a salvage title. This type of title serves as a red flag for buyers and insurance companies that the car has been damaged before. Many totaled vehicles could technically be repaired, but it doesn’t make financial sense for the insurance company to do so based on the car’s value.
If someone buys the salvage car, he or she will not be able to obtain full insurance coverage. Vehicles that have not been totaled have “clean titles.”
Where Can I Buy a Salvage Vehicle?
Car Insurance 101 notes that most insurance companies don’t offer direct auto sales. Instead, they place salvage vehicles up for sale through auto auctions, where you’ll also find abandoned, impounded, or repossessed cars available for purchase. Various companies, including Salvage Direct, host auto auctions throughout the United States. You can call tow yards, check the newspaper, or look online for information about car auctions in your area.
Usually, you can get information about the vehicles available before an auction occurs. The in-depth details provided on online auto auction sites offer as much information as you would get from seeing the vehicle for yourself including but not limited to:
- A full description of the vehicle’s features.
- Information about the condition of both the interior and exterior of the vehicle.
- Details about why the vehicle ended up at auction.
- Information about participant limits for the sale.
Sometimes, you can even bid on cars in an online auction from the comfort of your own home. You can place your bid at your own convenience without having to show up at a specific location and time. However, some auctions require you to hold either an auto dealer’s license or a business license to participate.
If you prefer to attend an in-person auto auction, you should be able to see each vehicle before you decide to place a bid. While you probably can’t take the car for a test drive, you can see obvious issues like rust, frame damage, and fluid leaks. Some companies run blind auctions, which means you do not see the vehicle at all before bidding. Even a car that has been completely rebuilt will retain its salvage title, however. Car Insurance 101 notes that you have a better chance of getting a good deal with an in-person auction, where you’ll usually find fewer people bidding than at an in-person auto auction.
You can also search online for “salvage vehicles near me” on Google to find insurance company cars for sale. Set the distance so you can find cars within driving distance if you want to see them in person before you buy.
If you aren’t handy with cars, try to bring a knowledgeable friend or family member when you buy a salvage car from an auction or a private dealer. They can provide advice about the potential repairs so you don’t end up buying a lemon in your search for a good deal.
What Are the Benefits of Buying a Salvage Vehicle?
When you buy a salvage vehicle, you can potentially save a significant amount of money on a car in decent shape. This option is particularly attractive if you have the know-how to restore this type of car on your own. Try to estimate the cost of the repairs before you bid to avoid purchasing a car that costs more to fix than it’s worth. Most auction veterans recommend bringing only your desired purchase price in cash to avoid spending more than your budget.
While the price varies dramatically depending on the size of the auction and how many people bid on a particular vehicle, Car Insurance 101 estimates the value of a salvage car at about 25 percent of its MSRP with a clean title. For example, if Kelley Blue Book says the car is worth $10,000, expect to pay $2500 for a salvage of the same make and model.
Even if you don’t need a vehicle to drive, Auto Auction Mall notes that many mechanics, both DIY and professional, shop for salvage cars to find spare parts. Others use these auctions as a source of project cars. Damaged and salvage parts may also be available at auto auctions in addition to full vehicles.
Can I Get Insurance on a Salvage Vehicle?
With the exception of certain vehicles, such as completely restored classic cars, you usually cannot get full coverage on a salvage vehicle. You can, however, buy basic liability coverage to meet the minimum insurance requirements in your state. Collision insurance may also be available for a vehicle with a salvage title.
Some companies don’t offer any type of insurance for salvage vehicles, so you will likely need to do your research. Insurance companies that do write policies for salvage vehicles typically charge more because of the higher risk associated with these cars.
Before getting insurance on this type of car, you’ll need to have a valid registration. Your vehicle will need to pass a safety inspection to prove its drivability. After you take that step, you can shop for a liability policy for your salvage vehicle. Otherwise, you cannot drive legally and may lose your license in your state.
Check this out if you need additional information, resources, or guidance on car insurance.
Can You Insure a Car with a Salvage Title?
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