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You’ve found the perfect used car, and the price is well below what you expected to pay. It looks like a great deal until you see a notation on the car’s title: Salvage.

A salvage title isn’t necessarily the mark of death for a car deal, but it should raise a red flag in your mind, and it will complicate purchasing and owning the vehicle.

What is a Salvage Title?

Though the definition of what specifically constitutes a salvage (or sometimes called “branded”) title varies by state, it most commonly refers to a vehicle that has been damaged to the point that repairs would cost more than the value of the car. For example, if the insurance company takes possession of the car and sells it to someone who rebuilds it anyway, the title is labeled “salvage”.

A salvage title doesn’t always apply to vehicles with collision damage. A car with significant hail damage, fire damage, one that has been in a flood, or one that has been stolen and then recovered after the owner has been compensated for the loss can be branded as salvage.

How to Identify a Car with a Salvage Title

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In most cases, you’ll see a notation on the vehicle’s title that identifies it as salvage or repaired salvage. In some states, you’ll also see title branding that identifies a vehicle as a former taxi, a police car, not built (but modified for) the USA, a warranty return, a lemon-law buyback, or a remanufactured vehicle.

Unfortunately, not all cars with branded titles will have them noted on the title when someone tries to sell them to you. Unscrupulous sellers may move the car from state to state, seeking a jurisdiction with less restrictive titling requirements. The process is called “Title Washing”, and it’s a way for sellers to remove the branding from the title and sell the car at a much higher price.

It is critical that you perform two steps before buying any used car to avoid being a victim of such a deception. First, spend about $40 to get a vehicle history report from Carfax or AutoCheck. In many cases the report will note any salvage titles in the car’s history, and it may provide insight into why the title was branded in the first place.

Second, you’ll want to pay an independent mechanic to go over your potential new-to-you car before you sign any paperwork. Their trained eyes can see where car structures have been repaired, where flood damage still exists, and where vehicle systems are not operating correctly. In some cases mechanics will find that parts of multiple vehicles have been forged into one car.

When you’re looking at any title document, you’ll need to make sure it is authentic. Seller of branded-title vehicles have an incentive to hide the true nature of the car, so be wary of anything on the title document that looks strange, and make sure that the document matches what you are seeing on the vehicle history report.

Why Do I Need to Be Careful Buying a Car With a Salvage Title?

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Most salvage titled vehicles have been damaged beyond what is economically viable to repair. If you don’t know about the circumstances under which the car was fixed, or the person who fixed it, it’s hard to be sure that the repairs were done properly. One way for a seller to make money on such a car is to do the repairs as cheaply as possible, so that they can make the most profit when they sell it.

Modern cars are mechanical marvels, constructed with complex structures and technologies that ensure your safety in case of an accident. Fixing such cars on the cheap can compromise safety if there is a future accident. Of course, the car may have been a project for a master mechanic, but there’s no way to be sure that is the case. If the rebuilder had no scruples, you can’t even be sure that the airbags that they installed are safe or functional, and that’s impossible for any inspection to discern.

You should treat the mileage shown on the odometer as dubious at best. If a car has high mileage, the entire instrument panel can be swapped for one displaying lower mileage.

One of the worst-case scenarios is when an unethical rebuilder buys stolen parts off of the black market, or tries to mask that a car has been stolen by installing parts from another car on it. If the police or DMV determine that to be the case, the vehicle or its parts may be seized, and the car may be ineligible for registration.

Many states require that vehicles pass safety, equipment, and/or emissions inspections before they can be registered. You’ll need to make sure that the car that you are buying will meet any state-mandated standards before you consider making the purchase.

Buying and Insuring a Salvage Titled Vehicle

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While it is possible to finance and insure vehicles with salvage or otherwise branded titles, it can be difficult and expensive to do so. Vehicles with salvage titles typically have no Blue Book value, so demonstrating to your lender the worth of the vehicle is more difficult than it is on a normal car. Because they don’t know how well such a vehicle will stay together, most financial institutions will charge high rates of interest for shorter loan terms due to the risky collateral, if they will finance it at all.

Similarly, most insurance companies will shy away from salvage titled vehicles because they don’t know the value, how well the vehicle will hold up in case of an accident, or how well such a vehicle will protect its occupants.

Most car dealers will not accept a salvage titled car as a trade-in, so you’ll be on your own when it comes to selling the car.

More Tools From U.S. News & World Report

When you’re looking for a used car, U.S. News & World Report provides an array of resources to help you get a great deal on the car that is right for you. Check out the best used car deals available, learn how to buy a used car, and find out all you need to know about financing a used car on our site. Our used car rankings can show you how the cars that you are interested in compare to others in the market.

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