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How to buy insurance for a salvage title car

You may save substantial cash if you’re buying a car that’s been declared a total loss and considered salvage, but then could wind up paying extra for your car insurance.

Some car insurance companies will charge you a higher premium if you buy a salvage title vehicle that has been rebuilt and is now considered roadworthy, says David Suarez, regional marketing director at Mercury Insurance.

But if the purchase price of that salvage Mercedes or Honda seems irresistible, here’s what you should know about insuring the car.

What is a salvage vehicle?

Insurance companies typically will declare a vehicle to be salvage when the cost of the repairs exceeds the car’s value. The car could have been totaled in a wreck, damaged by hail or floods, or be stolen and recovered months later.

Depending on the state where you live, a car is usually considered a total loss if the repairs would cost between 50 percent and 90 percent of the vehicle’s value.

If an older-model vehicle has been in an accident, it’s likely to be totaled out by the insurance company, rather than repaired, simply because of the cost of the labor involved to make the repairs. “Companies do it for economic reasons,” Suarez says.

Can I drive a car with a salvage title?

A car with a salvage title typically cannot be driven.

However, depending on the severity of the damage, some of these cars can be repaired and rebuilt.

Many states will require that you have the vehicle inspected to make sure that it is roadworthy. If the car has been salvaged, or rebuilt, it then receives a “branded” title.

How can I tell if it’s a salvage vehicle?

“State laws require that the seller inform a buyer in writing” that the vehicle they want to purchase is salvaged, Suarez says. But in several cases Mercury found the information was not clearly disclosed to buyers.

To make sure you’re not unknowingly purchasing a salvage vehicle, you check the car’s vehicle identification number (VIN) or title.

The federal government’s National Motor Vehicle Title Information System (NMVTIS) provides information on a vehicle’s condition or history. You can purchase those reports from a number of companies.

The National Insurance Crime Bureau (NICB) provides VINCheck, which can help you tell if a vehicle has been reported as lost but not recovered, or if it has been reported as a salvage vehicle.

CarFax and other private companies also offer information on a vehicle’s history.

Can I get insurance for a salvage title car?

Not all car insurance companies will insure salvaged vehicles. For instance, Travelers and Direct General are two companies that do not write policies for salvage cars.

Suarez estimates 20 percent to 30 percent of auto insurance companies won’t write these policies.

If you buy back a car from an insurer that has totaled it, you also may have more luck getting them to issue you a policy, says Penny Gusner, consumer analyst for Insure.com. The insurer knows exactly why the car was declared a total loss and will typically have photographs and other details of the damage.

At Mercury, which insures both new and used vehicles, about 2.5 percent of the company’s policies are written for salvaged cars, Suarez says.

However, if you’re trying to insure a salvage vehicle following a natural disaster, it might be harder to get any coverage, Suarez says. “Carriers tighten up on their desire to write salvage vehicle (policies).”

Car insurance companies are concerned after such events, he says, because unscrupulous car dealers may simply clean up the car so it looks presentable, but not actually repair the damage.

What documentation do I need to get insurance for a salvage car?

To obtain auto insurance for these vehicles, you’ll need to have a copy of your title, along with your registration and VIN, Gusner says.

Some insurance companies also may require that the vehicle be inspected, or ask for a mechanic’s report. They also may request that you have the vehicle appraised, she says.

Can I get full coverage?

Some insurers will only offer you liability coverage, which protects you if you’re at fault in an accident and injure someone else or damage their property, Gusner says.

They may not be willing to provide comprehensive coverage, which protects you in the event of damage to your car that isn’t due to an accident. It would cover things such as theft, vandalism or damage from a natural disaster. You also may be unable to obtain collision coverage, which covers your vehicle if it’s damaged in an accident.

Other carriers will provide all types of coverage for salvaged cars, Suarez says.

Will I pay extra for car insurance?

What you pay for insurance will depend on the carrier you choose.

You probably won’t pay less. Policies are written based on the year, make and model of the vehicle. The diminished value of the vehicle usually isn’t taken into account, Suarez says.

So if you buy a salvage 2012 Toyota Camry, you’ll pay the same amount for your car insurance as someone who has a 2012 Toyota Camry that hasn’t been damaged.

You may pay more. Some companies charge you extra for insurance, even though your vehicle is worth less than comparable cars.

Mercury is preparing to implement a 20 percent surcharge on such vehicles, Suarez says. “It came to our attention because we have seen a trend in our competitors of charging more for these vehicles.”

You may get less if the car is totaled. Your vehicle is worth less in the event of total loss than one with a clean title. How much less is a matter of negotiation – and one of the prime reasons some insurers stay out of this area altogether.

Car insurance company

Liability insurance coverage for salvage cars?

Where to Purchase Repairable Salvage Cars

Salvage vehicles aren’t always diamonds in the rough. If you want to take on a restoration project, learn where to find repairable salvage vehicles.

Repairable salvage vehicles can be used as project cars for those who love customizing vehicles or for others who want to restore classics.

What Is a Salvaged Vehicle?
Salvaged vehicles are those that have been totaled off by insurance companies. According to the National Association of Insurance Commissioners, a car is declared total loss if its repair cost is greater than its value. The insurance company pays the owner the Actual Cash Value of the car and retains the vehicle. In cases of floods and hurricanes, where a large number of cars are damaged, insurance companies examine a few and declare most of them “useless.” However, there are some that can be repaired. The insurers then auction the repairable ones to individuals or brokers to recover some money. At times, a stolen car is found after the insurance company has paid up. Such repairable salvage vehicles are usually in great condition and don’t need much repair.

Salvage Car Auctions
At least one salvage car auction takes place in the country every day. Insurance Auto Auctions has been holding salvage car auctions since 1982. They partner with insurance companies, rental car companies and fleet lease companies to sell totaled vehicles. Their website provides a detailed list of auction schedules and salvage vehicles. Its homepage has a map of the country featuring “Today’s Auctions,” including the address, contact details, time, date and the number of vehicles up for sale. Argo Auto & Cycles is another large salvage motorcycle and vehicle dealer. You can search their website for the vehicle of your choice by entering year, make, model or other criteria. A few of the company’s vehicles are up for sale on sites like eBay.

Find Cars Dealers Online
The Internet is a great resource for dealers of salvaged cars. There are several companies that deal solely in salvaged or wrecked cars. Elite Motor Cars Inc. is one such dealer. Their website has pictures, details and costs of repairable salvaged vehicles. All you need to do is find the car of your choice and pay for it. Another website to check out is SalvageAutosAuction.com.

Buying and Repairing Salvaged Cars
If you’re not someone who knows a lot about cars, buying a rebuildable car could be dicey. There might be problems with the airbags, anti-lock system, transmission and brakes that you’re unaware of. These flaws are neither detected at first glance nor during a test drive. Before buying a repairable salvage vehicle, get a mechanic or someone who knows about cars to take a look at it. Also, know how much it’s going to cost you to repair it. Get the right estimate, so that you don’t end up spending more than you intended to.

Most of these cars have a “salvage” title. While buying such a car, make sure you know what the rules in your state regarding such vehicles are. In some states, you can’t drive a salvaged title car unless it’s been inspected and re-titled.

Laws Regarding Salvage Car Repair

Salvage car repair can be a difficult legal issue to negotiate. You need to have the best information possible about a vehicle before you buy it. Each state has a specific set of laws governing the labeling of “salvage” on a title, as well as the repair that is necessary in order for the car to be sold once again. Familiarize yourself with the laws regarding salvage car repair, including fuel emissions tests and smog check certifications, so that you are best able to make an informed decision when purchasing a car that is labeled as salvage.

Salvage Laws Relate to the Damage of the Vehicle
Although each state has a unique set of laws in regards to salvage vehicles, the classification of a car as salvage is always determined by the damage to the vehicle itself. In most cases, a car that has been damaged in an accident or another incident will be assessed for current value, and that value will be compared to the estimated value of the car just prior to the damage. If the new value fails to meet a certain cutoff or percentage of the previous value, that car will automatically be sold for scrap parts and listed as salvage. The exact cutoff varies according to the state.

Loopholes through Different States
Some dealers take advantage of the fact that each state has a different value cutoff in order to sell vehicles without having to label them as salvage. If a car was damaged in the state of Oklahoma, where the damage must constitute at least 60 percent of the car’s previous value in order to earn a salvage title–but then the car was moved to Nevada, where the cutoff is a bit more lenient at 80 percent, the vehicle could potentially be repaired and sold once again without the customer having any idea it was to be labeled as salvage in another location.

Because it is impossible to tell that the car should have been labeled as a salvage vehicle through the vehicle history report, have the used car thoroughly examined by a mechanic before you make any transaction. Though salvage vehicles that were considerably damaged can be rebuilt to excellent standards of quality, it is crucial for your safety and peace of mind that you examine the vehicle to be sure of its status before you purchase it.

Rebuilding
Some states do not require that salvage cars be rebuilt to any particular standard of functionality. Rather, many salvage rebuilding laws serve only to deter theft and protect the component parts of the car. This is yet another reason to be cautious before purchasing a vehicle that was listed as “rebuilt”.

Where to Find Salvage Car Parts Online

Finding salvage car parts online is relatively easy these days.

Automotive Forums
One of the best places to search online for salvage car parts is on an automotive forum dedicated to the vehicle you’re searching for parts for. Automotive forums usually are centered on a certain make, model or style of vehicle, and as such offer a place for like-minded enthusiasts to share information and buy and sell parts for these vehicles. Most forums have a dedicated classifieds section, so be sure to look there. The added benefit of looking on an automotive forum for salvage car parts is that there is a wealth of knowledge related to the vehicle you’re looking for.

eBay
eBay offers another great option for finding salvage car parts online. The popular auction site has thousands of easily searched through listings. You can even search by distance and price to make the process easier. The downside to eBay is that you may have to compete with other buyers for the item you are looking for, but this is often a small price to pay for finding obscure or hard to find parts.

Craigslist
Similar to the classifieds in the newspaper, Craigslist offers an online forum for people to post and browse classified ads for just about anything you can imagine. The added benefit of Craigslist is that it has many region-specific sites, so the salvage car parts you locate should be close to you. Another benefit is that there is no listing fee, and often these savings are passed on to you. One downside of Craigslist is that you must be vigilant against would-be scammers. Though often easy to spot, caution is recommended. That being said, there are many legitimate sellers and deals to be had, just search wisely.

Local Salvage Yards
Even local salvage yards have found a place on the Internet. Many yards either have their inventories listed on their site or are members of a group of yards that do so, such as Car-Part.com. A visit to the site will provide you with a search engine that searches through hundreds of member salvage yards. Like eBay and Craigslist, you can even search by distance and price range. Once you locate a part, you can call the dealer that has it and arrange to pick it up locally or have it shipped to your home.

Frequently Asked Questions about Salvage Cars

Here are some of the common issues that auto enthusiasts ask about when they’re looking for a deal on a salvaged vehicle.

  • What about financing a salvage title vehicle? Lenders commonly have problems with financing a salvage title vehicle because of the relatively low value associated with this kind of car or truck. However, some customers may be able to find lenders who will back this kind of purchase
  • Is it hard to get insurance for a salvage title vehicle? In addition to problems with financing, those buying salvage title vehicles will very often have problems getting auto insurance for their new car or truck. This is partially because insurance companies find it hard to put a value on a salvage title vehicle. Buyers who want to arrange for auto insurance need to convince the auto insurance company to agree to a specific value for that vehicle
  • Will my salvage title vehicle get good MPG? Generally, a salvage title will not affect a vehicle’s fuel economy
  • What kind of auto repair has been done to my salvage title vehicle? Each vehicle has been rebuilt its own particular way. One clue is to look at replacement parts and see if they are factory standard or aftermarket parts. Aftermarket parts are not as expensive, but may not provide the durability or longevity of factory standard parts
  • Should I buy a salvage title vehicle online? An online purchase is even riskier with a salvage title vehicle. Auto experts recommend that the customer always inspect their vehicle thoroughly before buying it. Buying vehicles with low value or vehicles that do not drive well can lead to financial liability in the form of insurance, registration and other annual requirements for ownership

Salvage Vehicles

If you own a salvage vehicle for any of those reasons, you may find that many insurance companies only offer limited coverage for salvage cars, or won’t insure them at all.

If you are thinking about purchasing a vehicle with a salvage title and need information on how to get car insurance, continue reading.

What Is a Salvage Vehicle?

When an auto insurance company determines that the cost of the repairs (e.g., after an accident) is greater than the value of the car, they write the car off as a total loss.

The amount of your insurance settlement, if any, will be determined by your auto insurance policy and your car’s actual cash value (the cost of the vehicle if purchased new, minus any depreciation).

In most states, the car insurance company or the owner is required to notify the DMV that the automobile has been totaled. Depending on the individual state, the car will then be issued a “salvage title” or “salvage certificate” that notifies any buyers that an insurance company has deemed the car a “salvage vehicle.”

What a Salvage Certificate Means

A salvage certificate means that the car cannot be sold, driven, or registered in its current condition. A certificate is not a title.

If the car is repaired – for example, by a dealer who specializes in redeeming salvage vehicles – the owner can apply for a new title, but the title will always carry a designation that the vehicle has been salvaged or rebuilt. For example, the title may say something like “Revived Salvage.”

Once a car has acquired a salvage designation, your options for insuring the vehicle become much more limited.

NOTE: This is NOT the same as the designation that a car is “unrepairable.” In most states, an unrepairable car can only legally be sold for parts or scrap. Before you start looking for car insurance, be sure you understand exactly what designation your vehicle carries.

Pros and Cons of Salvage Vehicles

Pros:

  • Attractive price. Vehicles that have been salvaged often carry sticker prices that are a fraction of the cost of similar cars with a clean title.
  • Opportunity to save money. If you can repair your car after an accident in which it’s declared a total loss, you can save money on buying a new vehicle.
  • Enjoyment. If your hobby is rebuilding cars, buying a salvage vehicle is a good bet.

Cons:

  • Lowered safety. A salvage vehicle may have damage that can compromise your safety.
  • Hidden damages. You might find that a salvage vehicle has more wrong with it than you initially noticed.
  • Difficulty in finding car insurance.
  • Additional documentation requirements, including safety and mechanical inspections, before registration or insurance policies can be effected.

Before You Look for Auto Insurance

Before you purchase a salvage title vehicle, make sure you know the answers to the following questions:

  • Why was the car totaled?
  • Is the car a “salvage” or “non-repairable” vehicle?
  • What are the laws in your state regarding insurance and registration?
  • Can you get comprehensive coverage, or only liability coverage?
  • Can you afford to pay for repairs out of pocket if your car is damaged in an accident?

Get a full accident report and, if you can, the original repair estimate, as well as documentation of all repairs.

Insuring a Salvage Vehicle

In many states, you’ll have to jump through some hoops to get a legal title, registration, and insurance for a car that has been branded as salvage. The California DMV, for example, requires an application for title that includes the cost of all repairs, proof of ownership, a vehicle inspection by the California Highway Patrol, and a California brake and light inspection certificate.

Beyond the state regulations, however, you’ll also have to deal with insurance company rules. For example, some car insurance companies will not insure a car that they have declared totaled but will sometimes offer coverage for vehicles that have been totaled by other insurance companies.

Many companies limit the coverage in one or more ways, including only providing liability insurance, or excluding coverage related to the original damage to the car.

These steps can help you find the most reasonable coverage for your situation:

  • Follow your state laws to get the documentation you need to prove your vehicle is safe to drive.
  • Get the original repair estimate if you can. It will detail the damage to the car. When you talk to an insurer, be prepared to show proof that all the original damage has been adequately repaired.
  • Check with your current insurer if you have one. Your auto insurance agent will be able to tell you if your car insurance company extends coverage for salvage vehicles and under what circumstances.
  • Check with other insurance companies. Some companies will insure vehicles that have been totaled by other insurers.
  • Look for “salvage insurance” online. There are a number of insurance companies that specialize in policies for hard-to-insure vehicles and drivers.
  • Opt for liability insurance only.
  • Expect to pay higher premiums if you can find an insurance company that will extend coverage for collision.
  • Read the policy carefully for any limitations to your coverage.
  • Always comparison-shopto get the best possible coverage at the best possible price.

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