When do cars become salvage

Once an insurance company pays out the vehicle owner, the car becomes property of the insurance company. It registers the vehicle with the DMV as salvage, receives a salvage certificate and takes it to a salvage yard until the fate of the vehicle is determined. In most cases, the vehicle is auctioned off and sold to a dealer, dismantler, rebuilder, scrapper or exporter. While most of these buyers purchase salvage vehicles solely for parts, some buy them with the intent to resell to the public.

According to California Vehicle Code, a seller who fails to make the disclosure may be subject to a civil suit or penalty. Another hurdle is the DMV registration process. After buying a salvage car, the owner cannot legally register the vehicle with the DMV until it passes a set of certifications and inspections.

Scafidi says part of the problem lies in the lack of a comprehensive national system at the DMV level. Consumers would be protected if such legislation is implemented nationwide. While there are VIN Vehicle Identification Number database services that can scan whether a vehicle has been involved in an accident, those services can come at a hefty cost. Other services, such as Carfax, give a more detailed report on vehicle history for a fee.

The dealership makes the necessary restorations and registers the vehicle with the DMV. A fender-bender can cost more to repair than an old car is worth. While a salvage title brand is not necessarily a reason for refusing to purchase a used car, it's paramount that you research the history of the car before making a decision on whether to buy it or not. There is no standard definition for what qualifies a vehicle for a salvage title. That means in some cases, when a car moves from one state to another, that the car's history is erased.

That's why it's important to get a vehicle history report from CarFax or a similar company to research whether the car has ever been issued a salvage title. Now that you have the basics on what a title salvage means, let's explore details of other issues that come with salvaged vehicles, namely how to get salvage title insurance, how resale value and financing are affected and how salvage titles differ from other branded titles.

If you are hoping to fully insure a salvage-titled car , you may be in for a surprise. You may not be able to buy all types of car insurance. Few auto insurance companies are willing to write collision and comprehensive coverage on a salvage-title car. On the other hand, buying liability only will make for cheap car insurance.

Most insurers are reluctant to write comprehensive and collision policies because it is so difficult to put a value on these vehicles," says Kyle Mediger, an independent agent and owner of The Insurance Advisors, based in the Denver, Colorado area. If you buy back a car from an insurer that has totaled it, you may have more luck getting them to issue you a policy, says Penny Gusner, consumer analyst for CarInsurance. The insurer knows exactly why the car was declared a total loss and will typically have photographs and other details of the damage.

Financing a salvage-title car also is difficult. Without comprehensive and collision insurance to protect the car, it's unlikely you'll be able to find a lender, so be prepared to pay cash for salvaged vehicles.

Once a salvage title car is repaired, it would need an inspection and DMV approval to be legally driven again. Typically, after that, the salvage title will be "rebranded" as a rebuilt title. While the vehicle's title designation goes from salvaged to rebuilt, its obvious that it was rescued from a salvage title.

This is a red flag for anyone you may want to sell the car to. There is also little resale value. Dishonest auto sellers may apply for a new title for the salvage vehicle in a different state or withhold information on a new title application. You may have trouble insuring a car with a salvage title, even if the car has been repaired and issued a rebuilt title.

This can result in a lower resale value. Only some auto insurance companies offer coverage for vehicles with rebuilt titles. And among those that do, coverage options may be limited. Salvage vehicles are usually much cheaper because of their title status. Mechanics, body shop technicians and DIY car restorers may also want to consider a salvage car. Salvage vehicles often present more risks than most car buyers are willing to handle.

Safety concerns, the potential for costly repairs, and difficulty insuring and selling your car can make the decision clear for most people.

Sometimes insurance companies will allow you to keep a totaled car and reduce your payout by the remaining value.