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What Is a Salvage Title?

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What Is a Salvage Car Title?

When an insurance company deems a vehicle so badly damaged that it is declared a total loss (or “totaled”), the car’s title likely includes “salvage,” “flood” or “junk” vehicle designation.

A major accident, fire, hail or significant storms, such as a hurricane, are often the culprits of the “totaled” designation. Natural disasters are the most common reason vehicles are designated total losses. The National Insurance Crime Bureau estimates that 422,000 vehicles were “totaled” in the wake of 2017’s Hurricane Harvey.

Still, an insurance company’s designation of “totaled” doesn’t always mean the end of the road for a vehicle. Some salvage-titled vehicles declared total losses often wind up back on the road — some legally, and some illegally. A salvage title vehicle that has been repaired legally will have a rebuilt title.

Title Designations Vary

A “salvage” or “flood” designation on a vehicle’s title should alert subsequent buyers that they are purchasing damaged goods. However, each state in the U.S. sets its own rules for salvage vehicles, so vehicles labeled “totaled” by an insurance company might not have a salvage title or even an indication that it once sustained significant damage.

State laws on vehicle titles vary widely, so a car that was issued a salvage title in one state can be repaired, registered in another state and given a new title that doesn’t disclose its previous “salvage” status. The process is known as “title washing.”

Learn the Vehicle History

Title washing is one reason it is essential for car buyers to obtain a Carfax Vehicle History Report for any used vehicle that they consider purchasing. Even legitimate sellers may be unaware of a vehicle’s complete history, and shady sellers are good at disguising damage.

Carfax Vehicle History Reports provide information on major accidents, structural damage and damage from hail and floods. That is true whether a vehicle was declared a total loss or was issued a salvage, flood, junk or rebuilt (“branded“) title. All of that information is tied to the vehicle identification number, or VIN, which Carfax uses to check a vehicle’s history.

If You’re Interested In a Free Carfax Report, Head to Our Used Car Listings Page

How a Car Gets a Salvage Title

Insurance companies declared tens of thousands of cars total losses after Hurricane Harvey and other major storms, and those cars were often sold through auctions. It was expected the buyer would dismantle such a car for parts and crush the remainder. However, some unscrupulous sellers bought and rehabbed thousands of those vehicles and sold them to consumers in other states without disclosing their histories.

Likewise, some vehicles that are designated “junk” – meaning owners should only use them for parts – wind up back on the road with a clean title through title washing.

The Cost of Damage

Owners of some totaled vehicles can legally repair them and identify them on the title as salvage or rebuilt vehicles. These vehicles typically cost much less than comparable models that don’t need “rebuild” work.

Informed shoppers can buy legally rebuilt cars for bargain prices, but any such vehicle should receive a thorough inspection by a qualified technician before the purchase.

A vehicle that looks good on the surface may have severe structural or water damage.

Besides, once a vehicle is totaled, insurance companies may not agree to cover it or will charge higher premiums than usual because of concerns about the safety and integrity of the vehicle.

Similarly, lenders may not finance a vehicle that has such a checkered past and lower value. It is best to check with lenders and insurers before signing a contract to purchase a salvage vehicle.

In addition, once a vehicle is totaled or titled as a salvage vehicle, that will void the factory basic and powertrain warranties.

Next Steps

If you have questions about this story, please contact us at Editors@carfax.com