Definition of a Salvage Title

A salvage title is a document that ascribes ownership of a damaged vehicle that has been determined to be not worth fixing. Each state has its own requirements to determine the level of damage required to consider the vehicle "totaled out." While many insurance companies will allow the owner to maintain possession of a vehicle they have determined to be a total loss, most states place severe limitations on how those vehicles may be operated.

Identification

According the automobile research company, Carfax, when the threshold of repair cost to pre-damaged vehicle value exceeds 75 percent, the vehicle should be totaled out and the owner should receive a salvage title in place of his regular title. Some states do not issue salvage titles but instead may issue a salvage certificate or junk title which allows the vehicle owner to sell the damaged vehicle for parts.

Expert Insight

Insurance giant USAA notes that while most states will allow the vehicle owner to keep the damaged vehicle the salvage value will typically be deducted from the total insurance settlement paid to the policy holder. They suggest the vehicle owner check with their county clerk regarding state policies that may require a title change to a salvage or junk title and which may prevent them from re-registering the damaged vehicle in that state.

Geography

Because each state has different statutes which determine the definition of a salvage title, it is important to know how the state where your vehicle is located treats total losses. For instance, as of August 28, 2007 the state of Missouri requires the application for a salvage title on vehicles that are "sold for salvage, dismantling or rebuilding if the vehicle is less than seven years old at the time of purchase." However, this application is voluntary for vehicles that are older than seven years.

Considerations

Some states allow salvaged vehicles a second chance at life. In Alabama a salvage title is issued when an insurance company declares a vehicle a total loss, and that vehicle may not be operated on Alabama highway, or can it be issued a valid license plate. The Alabama Department of Revenue does have procedures by which once the vehicle has been restore to state approved safe operating condition it may be issued a rebuilt title which will allow it to operate legally on Alabama roads.

Warning

A salvage title is one means of alerting buyers to the history of the vehicle they are about to buy. They are also a means by which certain states identify stolen cars.

Resources

• Insurance company thoughts on totaled vehicles