How to Buy Cars from Insurance Companies

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Gianetta Palmer is a writer for, copywriter, and essayist. Her work has appeared in, Healthline, and The Dyrt Magazine. She is the author of Scrunchie-Fried and writes a lot about car insurance...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life...

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Reviewed byMelanie Musson
Published Insurance Expert

UPDATED: Mar 13, 2020

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Whenever a vehicle is deemed economically unrepairable, the insurance company will consider it a total loss. When this happens, the insurer will pay the vehicle’s owner for value of the car. The insured can then choose between giving up the vehicle or retaining the salvage rights and buying the car back from the insurer at a fraction of its original value.

If the insured does not choose to retain the vehicle’s salvage rights, the insurance company takes the vehicle away and brings it to a lot where it can be sold. In many cases, these vehicles are good as nothing more than scrap metal. Some people may be able to salvage parts from them to aid in repairs for other projects. Other vehicles, however, are still perfectly functional, and they may offer a good value for buyers.

How Can a Totaled Vehicle Be Operable?

When you think “total loss,” you might imagine a heap of twisted metal. Which some totaled vehicles are obviously unrepairable, many more are totaled because they are simply not economical to fix. This happens often with older vehicles that may only be worth a few thousand dollars. In some cases, the repairs the vehicle requires are entirely cosmetic, but repairing it would still cost more than the car is worth.

These pricey cosmetic damages may be as simple as small dents, paint scratches or other minor issues. Vehicles that have been damaged by hail or vandalism may be totaled despite being operable. Because the vehicle has been deemed a total loss, it must be wold on a salvage title, which will make the vehicle much more affordable to buy.

What is a Salvage Title?

When a car is deemed a total loss, its title is rewritten as a salvage title. This means that the vehicle no longer carries its original value and cannot be insured at the same value as other cars of that same make and model. In other words, since the owner was already paid for the value of the vehicle, it cannot be totaled out again.

Because of this, salvaged vehicles generally cannot be insured with full coverage insurance. There may be some exceptions, such as a fully-restored collector’s car, but most cars with salvage titles can be insured only with a basic liability policy.

In addition to insurance limitations, a salvage title serves as a warning to possible buyers that the car has sustained damage before. Even if the car is extensively rebuilt, it will retain the salvage title. The vehicle is no longer worth what it once was and cannot be sold for that amount, so the salvage title is a protection for potential buyers.

If you’re willing to take a risk on buying a salvaged auto, you can find cars in good shape for a very low price. Buying a salvaged vehicle is especially attractive if you’re familiar with vehicle repairs and maintenance and are able to rebuild it yourself.

How Much Will a Salvaged Car Cost?

Because these salvaged cars are bought at auction, the price fluctuates depending on demand and who is bidding. As a rule, a car with a salvage title is worth about a quarter of its list price. So, for example, if a car’s Kelly Blue Book value is around $2,000, you might be able to buy it on salvage for $500.

The best way to buy a car from an auction is to set aside the amount of money that you’re willing to spend and bring it with you in cash whenever possible. This way you won’t be tempted to go over your budget and you’ll know when to bow out of bidding.

How to Buy a Car From an Insurance Company

Insurance companies generally do not sell totaled cars directly. Instead, they sell cars through auto auctions. These are often the same auctions where cars that have been repossessed, impounded or abandoned are sold. The auctions happen regularly and are usually hosted by companies like Salvage Direct; you can find a nearby auction by searching online or calling tow yards.

Once you’ve found the time and place of an auction, you should be able to do some research on the vehicles involved. There should be an explanation of the vehicles up for sale, their conditions and how they came to be in the auction. There will also be explanations of any limitations placed on participants. For example, in some states, only people within the auto industry can buy a salvaged vehicle, while other states allow all individuals to buy one.

If possible, take a look at the vehicles you’ll be bidding on. You might not be able to test-drive them as you would another used car, but you may be able to inspect it for frame damage, check for leaking fluids or otherwise get an idea of what shape the vehicle is in. In other cases, this may not be possible and you might be buying the vehicle essentially blind.

Some auctions are actually completed online, so you don’t even have to come to the yard to buy the vehicles. While this option is convenient, it does mean that you’re buying the car sight unseen and could end up with something worse than you’d imagined. A reputable auction company will provide records of where the vehicles came from and what damages they have, but even then the car may not be what you’re expecting.

Once you get the car, be sure to examine it thoroughly and have a mechanic look over it to assess the damages and determine whether the car is safe to drive. If the car is not operable, you may need to re-sell it for scrap and could lose money on the purchase, making shopping this way a gamble.

If you’re car-savvy or know someone who is, exploring these car auctions can be a great way to get a low-price auto. You can use this car as a daily driver, a first car for a teenager or as a restoration project. The vehicle may not be pretty, but it can be functional and an excellent value.

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