The Fear of a "Salvage" Title:
You have just run a CARFAX, AutoCheck, or CarChex report on a used vehicle. A word appears…

“SALVAGE”

Those seven letters on an automotive title often send chills up the spine of a potential used car buyer. While most consumers are justifiably alarmed by such a label, there is also quite a bit of puzzlement as to what that word actually means. In most cases, the misunderstanding has a buyer thinking a “Salvage” title is much worse than it actually is.

What is a "Salvage" Title?:
A brand-new vehicle is said to have a “title” that is “clean” – free of any conditions. (The “title” is the legal document listing the registered information about the vehicle and its ownership.) The title of nearly all vehicles will remain “clean” until the end of their service life—and verbiage about damage is usually the exception to the rule.

If a vehicle is significantly damaged during its service life, the title is often noted and updated to reflect this information. One of the most common notations is the word “Salvage.”

The Official Definition:
“Salvage” on a vehicle title means the vehicle has been extensively damaged by collision, fire, hail, flood, or (in some states) stolen. The actual amount of damage done to the vehicle may be difficult to determine, but most states agree that when a vehicle is damaged so extensively that the cost of repair will exceed 75% of its pre-damage value, the title is labeled “Salvage.”

From "Total Loss" to "Salvage":
Interestingly enough, most vehicles are not immediately labeled as “salvage” after a serious incident, and there is a good reason for it. First, it helps to understand why the word “salvage” was chosen.

According to Dictionary.com, in the English language, “Salvage” means “…the act of saving.” A “salvaged” vehicle is actually being saved from destruction or the junk pile.

What makes a "Salvage":
Once a vehicle is seriously damaged, it is appraised (a monetary value is placed on it). If the damage is extensive and the repairs would be uneconomical, impossible, or illegal (such is the case with Katrina flood-damaged cars), the vehicle will be considered a “Total Loss” (or “Totaled” as many people say).

Consumers often have the right to purchase some “Total Loss” vehicles from junkyards or insurance companies. When this is done, the title is often changed to reflect the vehicle as “Salvage” – essentially meaning it has been saved from a “Total Loss.”

When is a "Salvage" Title a Good Purchase?:
Financially speaking, a vehicle with “salvage” noted on the title may be an attractive purchase. As most consumers have been taught to avoid this type of vehicle, the demand will be much lower so the pricing will often be at least 25% lower than market value for a “clean” vehicle. Sometimes the savings are much greater.

A "Salvage" as an Investment:
A savvy buyer or investor often purchases a “salvage” vehicle before it has been restored back to a useable condition (in this state, the value may have depreciated to just 20% of the original market value). Working closely with the shop, the quality (and cost) of the repair is tightly controlled and the vehicle emerges appearing nearly new—almost indiscernible to the untrained eye. Exotics, or high-end vehicles, are often good candidates for this type of restoration.

The Bottom Line:
If you intend to purchase a vehicle for long term purposes a 'Salvage' Titled rebuilt vehicle may just be the thing for you. You can get more vehicle for the dollar, but if you trade early with dealers the title will hold the value well below fair market pricing. So just think before you buy.