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Salvage Title Car

A salvage title is typically issued for a vehicle after it has been declared a total loss by an insurance company. This usually happens when the damage from an accident or natural disaster is too expensive to be repaired in regards to the vehicle’s value. For example, if a car is worth $2,000 and it would cost $3,500 or more to repair, it may be declared a total loss. Additionally, a salvage title can be issued after a vehicle has been used for government testing purposes; i.e. crash testing.

What Happens to a Salvage Vehicle?

When a car is declared a total loss, the insurance company may sell it back to the original owner, a salvage yard, or someone who specializes in doing extensive repairs. If the car is sold for any reason other than as scrap, a salvage title is issued. This is mainly to ensure that all repairs are made before the vehicle can be driven or sold again. The goal is to have the safest car possible on the streets. To make sure the repairs have been properly made, the car must pass a state-mandated inspection.  After all repairs have been made to a car with a salvage title, it must be inspected by a state motor vehicle department. The inspection process varies by state, but the car must pass before a new title can be issued and the car cannot be sold without the new title.

Problems Financing a Salvage Title Vehicle

Even if a new title is issued, a vehicle history report will show that a salvage title has been issued at one time. If someone needs to finance one of these cars, they may find that lenders are not be willing to offer a loan for a car that has had a salvage title in the past. Lenders are risk adverse by nature and securing a loan with a car that has been totaled in the past is quite a risk, because there may be hidden damage or the repairs may not have been done correctly. Either circumstance can cause additional repairs in the future that could cause a borrower to miss a payment or decide to stop repaying the loan altogether.


About the author: Jerry Coffey


Jerry Coffey is the financial expert here at A recovered "debtaholic," he now preaches frugal-living and sound money management here and at, where he is the chief contributor. He works for a major automaker.


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