Salvaged cars and salvage titles may sound forbidding to prospective buyers, but if you’re willing to take on the risk, they represent an opportunity to save money when buying a car. Take a moment to understand exactly what a salvaged car is to see if this could be an option for you.

If your car or truck is in an accident and the cost of repairing the vehicle is too high compared to the value of the vehicle, your car insurance company will declare it a total loss.

Your insurance company will then take possession of the car or truck. In some cases, the car or truck gets sold to a repair facility and the vehicle is fixed or rebuilt. The new title that gets issued on the vehicle is called a salvage title.

Total losses are not infrequent, but they don’t always mean the car has been damaged in a way that makes the car worthless.

A big accident on a low-value car where the engine or other critical moving part(s) is damaged or destroyed will cost a lot to repair and will not likely yield a reliable car. Such an example would be a risky purchase of a salvaged car.

If, however, instead of engine damage, the vehicle suffers cosmetic damage, it will also be expensive to fix and could even be considered a total loss, but may be an attractive option to purchase as a salvage since the engine and other important parts are presumably in the same condition as they were prior to the cosmetic damage.

The most important factors to consider when thinking of a prospective purchase are:

1.What elements of the vehicle were damaged enough to cause it to be labeled a total loss?

When a vehicle has been in an accident and the total damage exceeds a certain percentage of the value of the car (ranging from 75-90 percent), the insurance company will decide that it is not economically feasible to repair it and declares it a “total loss.” What happens next varies by state, but in general, the motor vehicle agency will then issue a “salvage certificate” to the car. This means that the car cannot be driven, sold or registered in its current condition.

Usually, the insurance company sells the car to either a repair facility or parts dismantler. If the car is repaired, most states require that it pass a basic safety inspection before the motor vehicle agency will issue a new title. When the state does issue the title, it’s “branded,” and notes that the car has been salvaged or rebuilt so future owners are aware of its past.

Different Kinds of Damage

A car with a salvage title hasn’t always been in a collision, however. Mark Binder, national salvage manager for Farmers Insurance, says that there are a number of reasons why a vehicle might get a salvage title:

• Flood damage: Flood-damaged cars sometimes get a salvage title. Some states will specifically call out flood damage on a car’s title, but other states merely use the term “salvage title."
• Hail damage: As with flood cars, the titles of vehicles that are damaged by hail can also get a salvage title if the state does not have a specific hail damage” designation on the document.
• Theft recovery: After a vehicle has been stolen and is missing for a certain period of time, the insurance company will pay off the vehicle. If the vehicle is eventually found, the insurance company is free to sell it to a salvager, which will replace any missing parts. Some states will then issue a salvage title for the car.
• Vandalism: If someone spray-painted or overturned a vehicle and caused enough damage, the car could get a salvage title. No states specify vandalism in the title, however. It will likely be issued a salvage title.