Freaked out by the thought of driving a car with a salvage title? It's not for everyone; but the fact is, you can save thousands of dollars if you do a little homework by buying a used car with a salvage title. Here's how.
What was your first reaction when you saw "salvage title" in the headline? Cringe and shudder? Outrage, that anybody could seriously suggest something so risky on a respectable site like this? In mixed company, no less? Step away from the ledge, slowly, exhale, and then hear me out. I used to feel the same way … until my friend Peter showed me his "new" 4Runner. Peter is a super-frugalista, and he saw the surprise in my eyes. He laughed, "Hey, it's a salvage title -- I got it real cheap." He bought his son one of those, seven years back, and that car has run problem-free all that time. So he thought, "Why not get one for myself?" Why not, indeed? What is a salvage title? It begins with what people sometimes refer to as a car being "totaled" or "written off." "Total" is simply shorthand for "total loss," meaning the amount an insurance company pays out for the car's full insured value. Most often, it's a collision that causes a car to be totaled; but they can also be totaled after a fire, flood, hail, or even theft. (If a car is stolen and not recovered for three to four weeks, depending on the jurisdiction, the insurance companies have to pay the insured, which, of course, turns the theft into a total loss.) Insurance companies typically total a car damaged by accident, fire, hail or flood when that damage is greater than its value. They naturally want to pay the smallest amount possible and, if that's the value of the car, then that's what they pay. When they do that, they effectively buy the car and its title passes to them. If they subsequently sell it, they are required to sell it with what's called a salvage title. Why even consider a salvage title? A car only gets a salvage title when something bad happened to it. Buying a used car is such a crapshoot to begin with, why compound that by even thinking about buying one with a salvage title?