Very low prices can usually be found for consumers who buy a vehicle with a salvage title. Automobiles are issued salvage titles when they have been declared a total loss by an insurance company. Most insurance companies declare a total loss when the repair estimate reaches 75% of the vehicle’s appraised value. Although vehicles with salvage titles can appear to be great deals, there are certain facts you need to be aware of before considering a vehicle with a salvage title.
Never make the mistake of assuming a salvage vehicle is a great deal because you are buying it for much less than the book value. Vehicles with salvage titles are very difficult to value. Many estimates suggest that the average salvaged vehicle is worth about 50% less than if it were not salvage. To be safe, use this figure for determining what to pay for a salvage vehicle.
Depending on how the repair was done, a vehicle with a salvage title may or may not have key safety features such as air bags or seat belt pretensioners. Vehicles without air bags can be dangerous for the occupants if it is involved in an accident. Since you can never be sure if all of the air bag components were replaced, it is a good idea to have the air bag system diagnosed by the brand dealer to ensure it is working properly. Seatbelt pretensioners lock the belt in place during a collision, to keep passengers from jerking forward too fast and getting injured. Without seat belt pretensioners, passengers in the vehicle may have an increased chance of being harmed during a collision.
Most insurance companies will not insure vehicles issued with a salvage title for comprehensive and collision coverage. The reason they do not is because placing a value upon the vehicle is difficult.
Many banks will not finance vehicles with salvage titles at all; others may but will place special conditions on the loan, such as shorter terms or very strict LTV (loan to value) ratios, often 30% to 60%. Strict LTV ratios may mean higher initial costs (down payment) when purchasing.
While there are many elements to be cautious about, it is beneficial to investigate before you buy a salvage title. Utilize this information to help determine if buying a vehicle with a salvage title is right for you.