There is a risk involved any time you buy a used vehicle, but the risks may be especially great if the vehicle is a salvage title car. Insurance companies title cars as salvage when the cost of repairs is greater than the car's value. Sound risky yet? In addition to being damaged goods, salvage title cars also carry other risks that normal used cars don't.
Difficult to Value
It is difficult to know if you are getting a good deal on a salvage title vehicle because they are tough to value. A good rule of thumb is to never pay more than half price for a salvage car. Use the Kelley Blue Book to find the value of a normal used model, then use half that number as a gauge for a fair salvage price.
Hard to Insure
Check with your insurance company before you invest in an “as is” salvage vehicle. Most insurance companies won't cover salvage cars because they are so difficult to value. You may be able to get liability coverage, but good luck scoring comprehensive or collision coverage on your salvage car. Before you buy, check out the insurance regulations in your state and contact a few different insurance companies.
Tough to Finance
If you cannot afford to pay for an “as is” salvage vehicle with cash, it may be difficult to find a bank that will finance the car. Some may offer loans, but with special conditions. For example, you may be required to make a higher down payment or commit to a loan with shorter terms.
Hard to Register
Let's say you found an insurance company to cover your car and got a bank to finance the purchase. Now you have to register your salvage title car, which can be a real challenge. In order to be registered, cars have to pass an inspection that proves they can safely hit the road. Check out your state's regulations and consider if your salvage vehicle will even pass the inspection. Otherwise, you are stuck with a junker that you can't even drive.
Have you purchased an “as is” salvage vehicle? How did you obtain insurance and financing? Let us know your tips in the comments below.
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