Salvage Value of a Vehicle

Badly damaged vehicles are considered totaled.

After a severe crash, the cost of repairing a car may exceed the value of the car. In this case, an insurance company writes the car's owner a check for the salvage value. The salvage value is based on trade-in value and other factors.

Cost of Repair

When the cost of car repair exceeds the trade in value of the vehicle, insurance companies consider the vehicle totaled, and pay the owner the salvage value rather than pay for repair. This is typically done in accordance with laws that prevent the resale of refurbished totaled vehicles, to keep dangerous cars off the road.

Determining Value

Determining the value of the car is a subjective task based on a number of factors. The main determination of the salvage value is to look up the "blue book" value of the car. This is the lowest price that a dealer would buy the car for. Other considerations are the condition of the car prior to the accident. Cars with mechanical problems or high-mileage vehicles have a lower salvage value.

Deductible

Insurance companies often charge a deductible as part of their collision insurance policy and deduct it from the salvage value they pay out.

References

• CarInsurance.com: Car's Salvage Value: How Much Does An Insurance Company Pay?