A salvage title is an automobile title with a notation that the vehicle has been damaged in excess of approximately 70% of its pre-accident market value. The exact percentage depends on the insurance provider and any applicable laws and regulations. This notation gets applied to a title when an insurance company pays a total-loss claim on a vehicle, but then sells the vehicle at an auction center. If the vehicle is kept by its owner through a buy-back program, then the vehicle will retain a clean title. A properly restored vehicle is still safely drivable even if it is technically considered a total loss by an insurance company, particularly with older vehicles where even minor cosmetic damage would cost more to fix than the vehicle’s pre-accident market value.
A “rebuilt vehicle” is a salvage vehicle that has been repaired and restored to operation. These vehicles are often damaged before they are rebuilt and new parts are typically used during reconstruction. In most states, an inspection of the vehicle is required before the vehicle is allowed to return to the road, to prove that it is road worthy.
There is no specific formula in most states that specifies when a vehicle is deemed salvage; this is typically decided on a case by case basis. Once the auto is involved in an accident, the insurance company then offers the vehicle back to the owner as an insurance buyback or the car is sold to insurance auction centers, such as IAAI or Copart. With an insurance buyback the owner is responsible for getting the repairs made and having the car inspected by the highway patrol or a state regulated inspection facility. At this point, the car still has a clean title, no matter of the degree of the damage done, because it was never owned by the insurance company. If the auto is not a buyback, it is towed to a salvage auction where it will be sold to an auto recycler or a rebuilder, and given a salvage title. A rebuilder can sell the car as-is or fix the car and resell it as a rebuilt salvage titled car.
Having a “Salvage” or “Junk” title only applies to the United States and Canada. All vehicles imported or exported to other countries will automatically obtain a “Clean” title, even if they have been involved in an accident.
Some companies in the United States, such as Carfax, sell title reports to prospective car buyers which, among other things, reveal these title statuses. The information, however, might be far from being complete because of the inability of these companies to check accident records in 23 states and because not all accidents get reported to the authorities (particularly when there are no injuries). In 2007, Carfax settled a nationwide class-action lawsuit and the company will now include prominent warnings that its reports may not be complete.
Industry standards followed by and noted in print by the National Automobile Dealers Association (N.A.D.A.) Appraisal Guides, Kelley Blue Book Market Report Official Guide, the International Society of Automotive Appraisers (I.S.A.A.) and additional automotive business entities within the United States of America, all devalue a motor vehicle that is in possession of a “Salvage Title”, by 20% – 50% of the normal, fair market retail value of the vehicle without a “Salvage Title”. The percentage variance increases with the younger age of the vehicle at issue and the retail value of that vehicle. Any vehicle that is more than 10 years old carries the 20% minimum devaluation to the fair market value of the vehicle. Once a vehicle is branded with a “salvage or junk” title of ownership, this type of tarnished history stays with the unit, even if the branded title is “washed clean” in another state to be free of the designation “salvage or junk”.