The Auto Industry Insider

Salvaged cars have become an increasingly hot topic throughout this recession. Not to say that salvaged cars weren't around before, because they've been around since body shops and someone with the bright idea of giving their totaled car a facelift in hopes of turning a profit. That said, salvaged car sales have been a consistent market for many years, however, over the last year they've skyrocketed. I've noticed a major increase in advertising on many car ad platforms (Autotrader, Cars.com, Craigslist etc), and a have had a significant increase in conversations with regards to salvaged cars. The most frequently asked question that I'm hearing "Do you think I'm getting a good deal?". I guess it really depends on the perspective.

A few weeks ago as I was sifting through a craigslist, I came across an ad that read 2007 Yaris S, 23k Miles, CLEAN ONLY $7500 obo. Naturally, I clicked on the ad to get some more details. I may not be the person who replenishes the dealership with cars, however, I wouldnt be one to ignore a seemingly great deal.

I called the gentleman and went through the standard questions (does it run good, why are you selling, are you flexible on pricing etc). I asked the gentleman if the car had any previous damage and he answered "it's been in a minor accident on the rear bumper, but it was fixed and it's nothing to be worried about". I scheduled an appointment to see, I printed out a carfax (which didn't report an accident) car and off I was.

When I arrived, the gentleman came out to greet me then opened his garage and pulled the car out for me to take a look at it. At first glance, I could tell that the car had been fixed up in many more places other than the rear bumper the gentleman claimed even though it wasnt reported on carfax. Let me just say, I dont consider myself an expert inspector, but If you see cars as much as I do, you can definitely tell when somethings not right. Anyways, I didnt point out my findings, but I did ask him again where the car was hit. He took me to the rear bumper and told me that someone had rear-ended him at a stop sign a few months prior and that it was completely fixed through the insurance company. I asked if the car was salvaged and he very casually replied "yes it is, but it's because of the minor rear end damage". I dont know the guy, but I quickly realized that this isnt the first salvaged car this guy had sold and it most definitely wont be his last.

I skipped the test drive and just lifted up the hood. The first thing I looked at was the frame, which to a trained eye was easy to spot the frame damage. I opened the doors and noticed that the frame panels had been worked on as well. I wasted my time! I asked this guy if he was sure it's only been hit on the rear as I began to point out all of my findings. The guy became a bit frustrated and told me it was a good deal, but if I wasnt interested, that several people were lined up who were. I asked him if he fed the same lines to everybody until someone bit and he pretty much escorted me off of his property.

To most people reading this, it may just seem like I was upset that I wasnt told that I was baited into looking at a salvaged car and that I just wouldnt buy one. The truth is, the guys approach is really what ticked me off. I began to realize that if people are being fed these lines, that it really just becomes a number game before someone hands over their hard earned cash for trash. Now I'm not saying that salvaged cars are trash, because they do run, but they significantly increase the dangers of driving. What people dont know, can definitely hurt them.

How a vehicle earns a "Salvaged" title.



Total Loss Phase:


A vehicle that has been branded with a salvaged title is a vehicle that was deemed by an insurance company as a total loss, either expenses outweigh the value of the car or it's deemed as hazardous and undriveable Example: If a car with a book value of $12k was in an accident and the insurance company notices that the frame was bent beyond repair the car is pretty much unsafe to drive, therefore, the insurance company will send the owner of the vehicle a check for the blue book value and call it a day. The insurance company will then give the owner the opportunity to repurchase the disfigured vehicle for pennies on the dollar, so that $12k they just paid out on the car, they'd be willing to sell the car back to the owner for about $1k. This car is now at the "Total Loss Stage". Still with me?


Frame Damage:


As one person once told me: "The frame is the vehicles support system. If the frame is compromised, so is the safety". The best example to explain the frame is to take a paper clip. It's strong enough to serve its purpose until you begin to take it out of it's original form. One bend in an unatural direction and the paper clip loses it's form and becomes brittle and with little effort thereafter, snapping it becomes almost effortless. The frame works very much the same way. When the reinforced steel's original structure is compromised, a minor accident can become a major problem - precisely the reason why insurance companies WILL NOT give salvaged vehicles full coverage insurance - not because of the value, but because of potential medical payouts.

Frame damage is unrepairable therefore considered DANGEROUS!


The Rebuilding Title Phase:


Before a car can be given a "Salvaged" title, the car must first be given clearance by the DMV as a "driveable" unit. So people that purchase "Total Loss" vehicles will contact their buddies at a body shop and tow the car in for an inspection. It is here where body shop will advise the person what will be needed to get the car in running conditions as well as the parts they would need to make it cosmetically presentable.

The buyer of the the "total loss" vehicle will then generally go to a junk yard and find the parts needed for pennies on the dollar and haul them back to the body shop so that they can perform a vehicle surgery. Once the vehicle is back in seemingly perfect condition, the owner of the salvaged car will take it to DMV to pass simple road tests (Accelerates properly, brakes properly etc...) and then puts it on the market.

The entire process from buying a "total loss" vehicle to "rebuilding" the title to a "salvaged" title will cost anywhere between $2k-$4k. Still with me?


Selling the Salvaged Car:


The owner of the salvaged car will take the freshly repaired vehicle and put it on the market. They'll advertise on every advertising platform, because lets face it, the cost to advertise is peanuts when compared to the payout once it is sold.

The most popular ad for a "salvaged" car is "SALVAGED DUE TO THEFT". This is highly unlikely, but in the event that it was, think about it - a vehicle that was deemed a total loss due to theft was basically unrecoverable for over 30 days. If thats the case, think about all of the shady things that the car has been through. It was probably stripped of all of it's parts (airbags, engine, transmission, radio system, anti-lock braking system, electricals etc...) these are items that are extremely lucrative in the black market. Safety components are very sought after parts and simply repairing or replacing them will never give you the manufacturers standards of safety. It's very risky business.

Another highly is that the car was salvaged due to a minor accident. Ask yourself this. If you were an insurance company and a car that you insured was in an accident that carried a book value of $12k and the vehicle was damaged from one bumper to the other. If you were going to get brand new parts for every single panel (this is a very unlikely scenario given that accidents generally have 1 or 2 points of impact) the cost would not exceed $4k with labor included. Would you pay $12k for that car because you simply felt that the car was beyond repair? The cars damage MUST EXCEED the book value or sustain significant frame damage in order to be deemed a "Total Loss".

After reading this, you may come to the conclusion that Im highly against purchasing salvaged vehicles. In reality, what I'm doing is pointing out information that is in the dark to a vast majority of consumers. If you way out the pro's and con's and decide that a salvaged cars risk vs reward is ok for you, then by all means the choice is yours. This is just some information to keep in your memory banks so that you can make a clearer decision when you're buying a used car in Los Angeles or wherever you may be. Also keep in mind that many cars with a salvaged title may not qualify for financing or warranty coverage. Cars that are deemed a total loss will automatically lose any warranty coverage provided by the manufacturer.

Happy Hunting