Three More Hurdles: Financing, Insurance and Resale
Salvage-title cars also raise issues when it comes to getting a car loan, getting car insurance and reselling the car.
1. You might not be able to get a car loan: Banks and credit unions shy away from car loans on salvage-title vehicles. They worry that cars that suffered enough damage to be declared a total loss might have weakened structural integrity and might not make it through another accident. Another concern is that, down the line, the cars might need a major repair that the borrower wouldn’t be able to pay for, leading to a higher risk of repossession. Banks only want to provide money for vehicles that will last the length of their loans, and salvage vehicles don’t have a great reputation for longevity. Banks are a little more forgiving when it comes to hail damage, which is often more of a cosmetic issue than a mechanical one, but you still might not get all the money you’re looking for.
To avoid being denied a car loan, you might be better off applying for a personal loan.
2. You would have to work harder to get car insurance: You will probably be able to get the liability insurance that’s mandated in most states for a salvage-title car that has been rebuilt or repaired and inspected, said Lynne McChristian, a spokesperson for the Insurance Information Institute. Because it’s a salvage-title car, it’s riskier to insure, and you might have to pay more than you would for a car with a clean title. “Keep shopping around,” she advised. “It’s a competitive market.” For liability insurance, the rate is likely to be more based on your driving record than the car’s history.
Getting comprehensive and collision coverage is likely to be more difficult, she said. That’s because an insurance company can’t be sure the vehicle is up to the same safety standards as a car that’s never been declared a total loss. “It could be a claim waiting to happen,” McChristian said.
3. You will have fewer options when it comes to trade-in or resale. “Most franchise dealers will not take a salvage-title vehicle as a trade-in,” said Arca, Edmunds’ pricing manager. “Your main options are selling it to a private party or an independent dealership — and they won’t give you very much.”
Determining the value of the vehicle will also be a challenge. Most sites that offer car appraisals, including Edmunds, assume a car has a clean title, no matter what condition level you select. “Even a vehicle in ‘rough’ condition can still have a clean title,” Arca said.
Since you will most likely be selling the vehicle to a private party, our advice is to use the price you paid for the salvage-title car as a starting point in your sale negotiations. If you’ve driven the vehicle for a few years, deduct a couple thousand dollars. Test the market with a price higher than what you have in mind and work