Is a Salvaged Vehicle a Smart Buy?

For bargain hunters, buying a salvaged vehicle has advantages and disadvantages. On the plus side: Even though it may not be worth as much as a clean-title vehicle, getting a good price on a safe, repaired car can make financial sense. According to the experts at Kelley Blue Book, you can buy a salvaged vehicle at a 20 to 40 percent discount from the market value. One of the negatives? You probably won’t get top dollar on your car when you go to resell it. So it’s important to do your research and consider your own intentions for the car. If you plan on keeping the vehicle for an extended period of time, it could be a smart purchase.

What is a Salvaged Vehicle?
When a vehicle is involved in a crash or damaged by flood, hail or theft, and the cost to repair is more than the car is worth, the insurance company will consider it a total loss. A car will either be sold for parts or bought with the purpose of getting it fully repaired to be road-ready again.

“The key to buying a salvaged vehicle is knowing its history and the type of damage that occurred,” says Brian Hamilton, vice president of consumer loans for SchoolsFirst FCU. “By getting a Vehicle History Report, you can ferret out any hidden problems. Sometimes a car has less severe damage, which makes it a good choice. But your research shouldn’t stop there.”

Pay for an Onsite Inspection
If you have your eye on a salvaged vehicle, the next step is to take it to a trusted mechanic or shop for a pre-purchase inspection, which can range from $100 to $200, according to JD Power and Associates. “This is money well spent,” says Hamilton. “They will go over your vehicle with a fine-tooth comb, including the engine, electrical system and body.”

Review the Repair Report
In an ideal world, it makes sense to purchase your car from a reputable repair shop and get the repair estimate printout, but that’s not always realistic. Many car enthusiasts repair and sell cars in the same way people buy and resell houses. “Don’t rule out buying a car from a private party,” Hamilton says, “Just be willing to ask for the information you need to make the best decision. If it is a private party, they should have all their receipts for major repairs and service. If you can’t get this, move on. There are plenty of good deals on the market, and if a seller is serious, they will give you the information you need.”

In addition to the costs of repairs, ask the seller these questions:

  • Why are you selling it?
  • How long have you owned the car?
  • Can I read the vehicle’s maintenance records?
  • Are you a vehicle dealer?
  • Is the title issued in your name?

If the private owner turns out to be a dealer, be extremely wary. “Sometimes an unlicensed dealer will pose as a private party, which puts you at a disadvantage, because they don’t always comply with state or federal laws governing vehicle sales,” Hamilton says. “The last thing you want is to purchase a car that is flood-damaged or has serious mechanical problems. Ask the owner if the car has a salvaged title, and if it does, just walk away. Chances are, it’s a scam.”

Selling Your Salvaged Vehicle
Like any car purchase, there may come a day when you want to sell it. If you are considering buying a salvaged vehicle, you need to consider what it will take to resell it before you move forward with the purchase. “The truth is, purchasing a clean-title vehicle makes it much easier to sell,” says Hamilton. “That doesn’t hold true with a salvaged-title vehicle. Many dealerships won’t take on a salvaged vehicle, even if it has been completely repaired, which leaves you with the options of selling to a private party or an independent dealership.”

If you have questions, our experts are here to help. Call us or come into a branch to talk about your options.

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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.

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