Should You Buy a Car with a Salvage Title?
"OK, wait, you're telling me I can get a year-old Pardini Superleggera for less than half the cost of a new one?"
"There's gotta be a catch — right?"
In this case, that particular gorgeous Italian masterpiece of automotive engineering fell victim to an incident, the consequences of which led its insurer to declare it a total loss. An enterprising individual subsequently bought the car for next to nothing, repaired the damage and is now offering the Pardini for sale for a bit more than next to nothing.
It's tempting right?
But should you buy a car with a salvage title?
What Exactly Is a Salvage Title?
As indicated above, a car gets a salvage title when it has been declared a total loss by an insurer, repaired and offered for sale again.
In other words, the car has been "salvaged" from the wrecking yard.
With that said, a salvage title doesn't always mean the car has experienced a collision. It could be fire or flood damage — or any of a number of other events. In some instances, the car could even have been stolen and recovered after the insurance company paid out the claim.
Whatever the cause, states insist such cars be titled salvage to warn future buyers a problem might exist.
There's a Degree of Risk
Depending upon the nature of the precipitating incident, any number of problems might surface after buying a salvaged automobile. On the other hand, perfectly serviceable vehicles sometimes acquire the stigma if the problem would cost the insurer more to fix than just paying the claim. This happens quite often with expensive cars that decline in value rapidly. Depreciation reduces their fair market price significantly but their repair costs remain constant, often making the cost of fixing them more than they're worth.
Such a car might give many, many years of good service after the repair, never requiring anything more than routine maintenance. However, this depends heavily upon the quality of the refurbishing. After all, most people who buy salvage cars with the intention of reselling them are intent upon maximizing their profit potential. There's a very real chance the repairs are only good enough to get the car running again and/or give it an attractive appearance.
Financing and Insurance
While there are financiers out there willing to loan against salvage titled cars, it's a costly proposition. You'll have no reliable way to establish the true worth of the car because it has no set Blue Book value. Plus, lenders know they'll have a hard time selling it if they have to repossess it. Simply put, money people aren't going to be clamoring over one another to get your business with a car of this nature.
Similarly, insurers will be highly selective about the type of coverage they'll offer. While a liability policy is likely to be readily available, collision and comprehensive coverages require a valuation of the car. This means you'll run into the same problem you would trying to get financing.
If price is the primary draw here and you're worried about insuring the car or getting a loan, you might consider doing a new car lease vs. a buy of a salvage titled car. You'll still get lower monthly payments than if you bought a new car. Plus, financing and insurance would be readily available as well.
So, Is It Worth It?
Ultimately, it depends on the type of car, what its problem was and whether or not you see yourself keeping it for long time. Should you buy a car with a salvage title, reselling it will require you to find someone else who is more concerned about price than potential problems. Sure, they're out there, but you'll never get full value for the car. Long story short, you're opening the door to a whole lot of trouble to garner those savings.
If you decide to go ahead, get a pre-purchase inspection before you buy.
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