What Buyers Should Know About Salvage Title Cars

A car title is a legal document that proves you own a vehicle, much like a deed to a house.  Every vehicle sold in the United States comes with a title, and although the exact information on the document varies by state, car titles always include a vehicle’s VIN and year, make, and model of a vehicle, as well as its odometer reading. Regardless of whether you buy a new or used car from a dealer or from a private seller, you’ll receive a car title.

Along with showing proof of ownership, a car title also lets you know if a vehicle is damaged or is defective. If you’re shopping for a used car, you may come across a vehicle with a salvage title that indicates water damage. And as we approach peak hurricane season, thousands of flood-damaged cars will likely enter the market in the coming months. What does that mean and should you avoid salvage title and flood-damaged vehicles?  We have the answers.

Salvage Title Vehicle: What It Means

There are two categories of titles: clean and branded. A clean title means that a vehicle has a clean record, while a branded title means that a vehicle has incurred serious damage that needs to be disclosed. The most common branded title is a salvage title.  (For more examples of branded title vehicles, check out our handy guide.)

If a car has a salvage title, it means that the vehicle has sustained significant damage and has been deemed a total loss by an insurance company. That most likely means that the vehicle was in a major accident, and the cost to repair the vehicle exceeds what it’s worth. In that case, the insurance company will pay out a damaged vehicle claim for the value of the car to its owner and take possession of the vehicle. 

After the car gets towed to an impound lot owned by the insurance company, it's sent to a salvage auction house specializing in cars that have suffered an untimely demise. The car is most often bought by a junkyard and its parts are used for scrap metal or to repair other vehicles. Or, if the damage isn’t too significant, an auto body shop may repair and resurrect the car. If the once salvaged car passes inspection, it will be resold with a rebuilt title. (Check out our What is a Rebuilt Title Guide to learn more.) Lastly, a dealer may choose to sell the car as is in hopes that it will attract a buyer who is willing and able to repair it. 

How Does a Car Become a Salvage Title Vehicle?

Salvage title laws vary from state to state. For example, what one state defines as a salvage vehicle may be different in another state. However, in most states a salvage title includes a vehicle in one of the following categories.

• The vehicle has collision damage.

• The vehicle had flood damage.  Some states will specifically mention flood damage on a vehicle’s title, while others will classify flood damage as a salvage title.

• The vehicle was damaged by a fire.

• The vehicle has sustained major damage from a storm such as hail or a tornado.

• The car has been stolen and recovered after the insurance company determined it a total loss.

In New York State, a vehicle must be branded as a salvage if it is eight model years or newer, and if the vehicle was destroyed or received damage in the amount of 75% or more of its value when the damage occurred.

In Florida, a vehicle must be labeled as salvage if an insurance company declares it as a total loss. However, the percentage for what is total loss classification varies. It can be if repair costs total as little as 50 percent or as much as 95 percent of a vehicle’s value.

In most states, it is illegal to drive salvage title cars on public roads. To learn about what is considered a salvage vehicle in your state, check with your local department of motor vehicles (DMV).

The Danger of Flood-Damaged Vehicles

Vehicles are built to get wet, but they're not designed to get flooded. A car that is the victim of flooding has likely been submerged in multiple inches to multiple feet  of water. Being flooded to that extent can wreak havoc on a car, causing anything from glitchy electronics to ruined engines depending on how much water ended up in the car.

Cars deemed to have flood damage get bought back by the insurance company and are sent to the auction, where they typically are sent to the crusher. But sometimes people try to fix and flip a flood car. Just like cars with salvage titles, flood-titled cars are to be avoided.

Beware of Title Washing

Because states have different regulations on what constitutes a salvage car, moving the car to a state with more lenient laws can have the brand removed from the title. Because titles are issued by the state’s RMV, a vehicle will get a new title if it’s sold in another state.

A title can also be rebranded by physically altering it. Some title-washing schemes involve a seller making physical changes to the paper document that remove all evidence of branding.