by Armando Martinez
The answer to the question, “Can you sell a car with a salvage title?” is yes…maybe.
There is sometimes great value hidden behind a salvage car title for a knowledgeable person to uncover. You may be able to refurbish a salvage title car and sell it at a profit, but you must be careful to understand and follow the legal process in your state.
Anyone can sell a car with a salvage title or change a salvage title to a rebuilt title. However, there are critical things you should know and do before selling a salvage title car — investigate its history, inform private buyers it is a salvage vehicle, and compute the fair value of a salvage title car.
What Is a Salvage Title?
A salvage title tells you an insurance company has declared a vehicle a total loss. Salvage titles are legal documents stating that the cost of repairs is greater than the car’s value.
Usually, insurance companies obtain salvage titles, but individuals can get them from the department of motor vehicles (DMV) too. If you decide to keep a car after the insurance company has written it off, you can apply for a salvage title at your state’s DMV.
Salvage title laws vary depending on where you live. Most states require damages exceeding 75% of the vehicle’s resale value. However, several states use a computation formula or accept insurance company payouts as proof, so you’ll need to check your state law.
How a Car May Become Salvaged
A vehicle can become salvaged through damage, theft, or heavy usage. The principal causes of what makes a car salvage title are:
- Collision damage from an accident
- Water damage from flooding
- Fire damage
- The vehicle or a significant portion of its parts were stolen
- Heavily used like taxis or some government vehicles
- Returned under warranty
Knowing and disclosing the salvage title vehicle history is critical to selling a salvage car.
Can Salvaged Cars Legally Be Sold?
Yes, you can legally sell a salvage title car. However, it is illegal to sell a salvage title car without informing the buyer in writing, even if you’ve repaired the damage and gotten a rebuilt title.
Failing to disclose a salvage title can result in civil and criminal penalties. You should check your state regulations with the DMV to understand clearly what you must disclose on a salvage certificate or to ‘brand’ the title as being for a salvage vehicle.
Best Practices When Selling a Salvage Title Vehicle
Adhering to best practices when selling a salvage title car will protect you from possible penalties and help ensure that the sale proceeds smoothly, with everyone understanding the deal.
Make a Full Disclosure About Your Car’s Title Status
Making a full title status disclosure may avoid after-sales issues, providing you with legal protection if the salvage car buyer experiences unexpected problems with the vehicle. Motor vehicle branding is a written notice describing any irregularities with the title.
For example, in the state of New York, branding is required by law if the vehicle:
- Has been rebuilt after sustaining 75% or more damage
- Was not in accordance with the warranty
- Was not manufactured in conformance with U.S. standards
- Is reconstructed
- Entered the state with a branded out-of-state title
- The odometer is not tamper resistant
Branding requirements vary from state to state, but dealers must inform buyers in writing if the vehicle is branded. Branding could be a notice handed to the customer, written on the bill of sale, or printed on the title. If a vehicle title has codes or marks you need help understanding, you should contact the DMV and ask what they mean.
Explain the Damages and Current Condition
Motor vehicle damage means any change in the structure, body, or equipment caused by the damaging incident — usually collision, theft, vandalism, fire, flood, or any other cause.
The current condition can mean the status of any repairs. These conditions include:
- Excellent
- Very good
- Good
- Fair
To meet the criteria for any of the above conditions, vehicles must have clean titles without having had a salvage title or branding.
Provide a Vehicle History Report
An accurate vehicle history report can help establish trust, make car sales go smoother, and protect you against future legal claims. A vehicle history report usually includes:
- Previous owners and how they maintained and used the car
- Accident history and any damage
- Title information and any liens held
- Service history and any recall notices
- Odometer readings
You can get a free vehicle history report to see if the car was stolen or has had a salvage title from the National Insurance Crime Bureau by entering the vehicle identification number (VIN). You can also purchase a vehicle history report from Carfax or AutoCheck for a small fee.
Let Potential Buyers Know About the Estimated Repair Costs
If your rebuilder process isn’t complete, any salvage title car buyer will find it extremely helpful to have an estimate of repair costs.
You can get a free estimate online if you know exactly what needs to be repaired. Go to a site like YourMechanic or AAA and enter your vehicle details. You’ll soon have your free estimate.
Your other option is to get an extensive vehicle inspection done by a local mechanic. Expect to pay $150-$250. Checking Google reviews may help you find a good local mechanic. The inspection should provide diagnostic information and cover the:
- Exhaust system
- Wiring
- Steering
- Suspension
- Brakes
- Tires
- Wheel alignment
- Fuel system
Set a Fair Price
Pricing vehicles with a salvage title is calculated differently than figuring the price for rebuilt titles. Both calculations have so many variables that there are no standard formulas.
The insurance company often determines salvage title value, and each has a formula that may be negotiable. You can get a ballpark figure by adding the retail price to the trade-in value and dividing it by two to get the market value.
Call the insurance company and ask what percentage they use to calculate salvage value. Multiplying the market value by your insurance company’s 75-80% will give you a ballpark salvage value. Factors like special equipment or low mileage can influence the result of this method.
Rebuilt title vehicles usually sell at a 30-50% discount from retail value because they may have no trade-in value and can be troublesome to finance and insure. This steep discount makes rebuilt title cars attractive to private buyers willing to shoulder the risk.
Is There a Market for Salvage Title Cars?
There is a large, well-developed market for salvage vehicles. Some online sites deal exclusively in them, while many individuals and automotive shops take advantage of the opportunity to restore and resell a damaged car.
Often they can do the work for less than it would cost an insurance company because they can source parts cheaper or discount labor expenses. An individual rebuilding a salvage vehicle will often figure that anything they make above the cost of the damaged vehicle and parts is money in their pocket.
Salvage vs. Rebuilt Title: Are They the Same?
If you’re wondering, “What are the differences between a salvage title and a rebuilt title?” they are not the same. A salvage title is issued after a vehicle has been damaged. A rebuilt title can be issued after the damage has been repaired and the DMV has done a junk inspection on the car to be sure it’s safe for roads.
Remember that if you change a salvage title to a rebuilt title, the new title will state that the vehicle has been salvaged, and you must disclose this to the buyer.
Insurance and finance companies treat cars with rebuilt titles differently. Many finance companies refuse to loan money to them, while those that do may charge higher interest rates or commissions.
You probably won’t be able to buy insurance on a salvage title car until you’ve rebuilt it and have changed the salvage title to a rebuilt title. With a rebuilt title, you may be able to buy the mandatory basic liability car insurance. However, many insurers refuse to sell comprehensive policies covering damage to a rebuilt car because it may be challenging to determine which event caused the damage.
Salvage Vehicle Private Party Transactions Just Got Easier
Everything you need to complete a salvage title vehicle transaction with a private buyer in any state is available in one place: from the people behind this informative article.
This article was written by Armando Martinez. Armando Martinez is among the nation’s experts on automotive titling, registration, DMV services and document operations. With nearly two decades of experience across a broad range of financial services functions and some of the largest names in auto, from Wells Fargo to Uber, Armando combines vision and ingenuity with a wealth of information so auto shoppers and sellers can learn from his experience.
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