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What is a rebuilt title or salvage car title?

Have you ever wondered what happens to cars when they are “totaled” by a car insurance company after an accident? Technically these cars cannot be driven or have a license plate, but many states allow them to be sold to special dealers who salvage and sell the useable parts or completely rebuild the vehicles and sell them as useable cars. The title issued to such a car is known as a “salvage title” or a “rebuilt title.”

When is a salvage or rebuilt title issued?

Salvage or rebuilt titles are issued any time a car is originally marked as totally destroyed by an insurance company and a check is issued for payment of the vehicle to the insured. At that point, the wreckage still belongs to the insured party, who can choose to sell the wreckage for parts or keep the car. There is little point to keeping the vehicle, however, because a new title cannot be issued on the car, nor can the car legally be driven on the roads.

In order for a car to be totaled, the damage has to be severe enough that the insurance company simply pays the insured the value of the car rather than attempting to repair it. For a newer model, this literally means that the car is damaged so badly that it will probably never run again. On the other hand, older vehicles are often totaled even when they do not have significant damage because it is cheaper for the company to pay the book value than to pay for repairs to the car. In these cases, salvage vehicles may be rebuilt by a dealer who has access to the tools and parts needed for repair, and the car might be drivable once again.

However, once the car has been “totaled” it cannot be sold as a drivable car, so a salvage title must be issued. This alerts anyone buying the car that the car was once totaled by an insurance company and is not a typical used car. In many cases, the fact that a car has a salvage title automatically means that the buyer will pay less for the car than if it were a similar model that had not been totaled.

There are problems associated with salvage or rebuilt cars, however.

Many car insurance companies will not insure these vehicles, although some major companies such as Progressive do offer salvage car policies. It is important before you invest your money into a salvage car purchase that you understand the insurance limitations of your chosen automobile insurance company regarding these cars.

The reason that many auto insurance companies have such a problem insuring salvage vehicles is that it is almost impossible to determine their true retail market value. Kelly Blue Book is the standard used by most insurance companies to figure the value of a car, but Kelly Blue Book value does not apply to salvaged cars. Experts estimate that a salvaged car may be worth as little as 50 percent of its Kelly Blue Book value. This means that banks and insurance companies have a real problem if they loan money or insure these vehicles, because it will be difficult for them to determine the car’s value if a claim is to be paid.

There may also be safety issues involved with a salvage vehicle. Because the car’s security systems were already compromised in the initial accident, it is hard to determine if the repairs on the car have brought these safety features back up to standard. Airbags might not deploy, rollover bars might not hold up, and other crucial safety features might malfunction. The only way to be certain of whether the safety features are truly in working order is to know the history of the car’s accident and how the repairs were conducted, and this is rare when purchasing a salvage vehicle.

The other problem with buying a salvage car is that you may not be able to resell it. While you have cash available to purchase a vehicle, not everyone does, so if you want to sell the car to someone who is seeking financing, you will find that they will not be able to secure a loan on this particular vehicle. This limits your sales market and may turn away potential buyers who do not want to be stuck with the same problem if they eventually decide to sell the vehicle. Unless you can pay cash and you plan to keep the vehicle for many years, it is usually better to avoid purchasing a salvage vehicle.What is a rebuilt title or salvage car title?, 10.0 out of 10 based on 1 rating