Three hurdles: financing, insurance and resale

Salvage-titled cars also pose problems when it comes to obtaining an auto loan, obtaining auto insurance, and reselling the car.

1. You may not be able to get a car loan: Banks and credit unions avoid car loans with salvage title vehicles. They are concerned that cars that sustained enough damage to be declared a total loss may have weakened structural integrity and may not survive another accident. Another concern is that, in the future, cars may need a major repair that the borrower cannot afford, increasing the risk of repossession. Banks only want to provide money for vehicles that last the duration of their loans, and salvage vehicles don’t have a great reputation for longevity. Banks are a bit more forgiving when it comes to hail damage, which is often more of an aesthetic issue than a mechanical one.

To avoid being denied a car loan, it is best to apply for a personal loan.

2. You’d have to work harder to get car insurance: You will  probably be able to get the  liability insurance that is required in most states  for a salvage-titled car that has been rebuilt or repaired and inspected, said Lynne McChristian, spokesperson for the Insurance Information Institute. Because it is a salvage titled car, it is riskier to insure it and you may have to pay more than you would for a car with a clean title. “Keep shopping,” he advised. “It is a competitive market.” For liability insurance, the rate is likely to be based more on your driving record than the car’s history.

Comprehensive and collision coverage is likely to be more difficult to obtain, he said. This is because an insurance company cannot be sure that the vehicle meets the same safety standards as a car that has never been declared a total loss. “It could be a claim waiting to happen,” McChristian said.

3. You will have fewer options when it comes to trading or reselling. “Most franchise dealers will not accept a salvage title vehicle as a trade-in,” said Arca, Edmunds’ price manager. “Your main options are to sell it to a private party or an independent dealer, and they won’t give you much.”

Determining the value of the vehicle will also be a challenge. Most sites that offer auto appraisals, including Edmunds, assume a car has a clean title, no matter what condition level you select. “Even a vehicle in ‘tough’ conditions can have a clean title,” Arca said.

Since you will most likely sell the vehicle to a private individual, our advice is to use the price you paid for the salvage-titled car as a starting point in your sales negotiations. If you’ve been driving the vehicle for a few years, deduct a couple thousand dollars. Test the market for a higher price than you have in mind and work your way down until you get the deals you are looking for.

Lastly, don’t hide the fact that your vehicle has a Salvage Title. If it does, it is a fraud. The buyer will finally find out when they deliver the title or if they get a vehicle history report. Honesty is the best policy when it comes to cars with a colorful past.

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