Help! I Bought a Car from a Dealership That Was Listed as a “Total Loss” by an Insurance Company, But Now Has a Clean Title… Am I in Trouble?

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Help! I Bought a Car from a Dealership That Was Listed as a “Total Loss” by an Insurance Company, But Now Has a Clean Title… Am I in Trouble?

Get free insurance advice on demand!

The short answer is “NO.” For those people who are new to the game, let’s talk basics first so that you can understand why buying a salvage car is not a good idea.

A salvage car is a car that has been deemed irreparable by an insurance company. A claim had been previously made on the car, and after inspection, it was deemed a money pit.

According to DMV, a salvage-title car is defined as a “total loss.” This includes cars that are damaged or wrecked. It also includes an insured car that was stolen and the insurance agency paid the owner to get it replaced. 


Car Jargon You Need to Know When Buying a Used Car


A title agency is where you go to get the car registered in your name. This is also where you can find out whether the car you bought has a clean or salvage title.

A CarFax is a document that lists certain details about the car, the most important of them being the damages to car from any previous accidents.

The good news is that if you unknowingly bought a salvage-title car, then you can get the title changed to “rebuilt car” in four simple steps, which we will talk about at a later date. Before we discuss why buying a salvage-title car is not a good idea, let’s have a look at this scenario:

David was excited to by his first car. He had been saving for quite some time, but decided to take out a loan instead. Cars don’t come cheap, and he knew that future repairs would eventually make themselves known. So he took out a loan of 15k and bought a car from his neighbor. He figured that buying from his neighbor would be the same as buying from a dealership. Plus, if any trouble did arise in the car, he could easily reach the previous owner. The car had been on sale for a week and it looked pretty well. He got it inspected and asked his neighbor for the CarFax. Everything looked in order and he finally bought the car.

Since the previous car owner was his neighbor, David decided to get the car’s title transferred after a few days. Work had been pretty hectic, which turned into late night sittings. After two weeks, David realized that he had put off the title transfer for too long and decided to head over to the title agency. After collecting all the documents, he headed over to the DMV to get the deed done. With radio blasting his favorite song, he drove cheerfully with no care in the world.

After entering the title agency building, David headed straight to counter and gave the woman his driver’s license and title. A few clicks here and there, and she tells David that the car is salvage. Cue in the shock and David said, “It can’t be.” She checks again and then tells him that’s what the database says. David then handed her the CarFax and pointed out all the minor damages that were listed on it. 

However, the woman still says that the car is salvage. Thinking that he has been ripped off, he calls his neighbor and asks him what the deal is. Turns out, the car didn’t actually belong to his neighbor. He had gotten it as a present from his uncle. Since the car had a salvage title out of state, the status changed to “clean” when it reached another state. 

Salvage vehicle laws vary from state to state. Before 2017, certain states had no IVIS system, which is why salvage-title cars got easily past the system and dealerships were able to obtain a clean title.

Even the neighbor’s uncle had no idea that the car had a salvage title. It was a long run scam and David had just become the latest victim. While the car was in tip top shape, there were plenty of things that David was worried about. If he sold the car, he would get around 70% of the car’s original price, which meant he would have to cover the difference of 2 to 3k out of his pocket. This wasn’t even his main concern! It all came down to car insurance because who would insure a car that is one mile away from falling apart?


The 3 Hurdles of Buying a Salvage-Title Car: Insurance, Finance. and Resale


Ineligible for a Car Loan


Credit unions and banks shy away from lending money to people who have a salvage-title car. They worry that since the car is severely damaged, it’s highly possible that another accident will make it fall apart in all places. If the owner can’t pay for the repairs, the car will get repossessed and the bank will suffer.


Struggle for Car Insurance


Unless your salvage-title car has been inspected, repaired, and rebuilt, no insurance agency will give you liability insurance. If you do end up getting an insurance policy somehow, the premium rate will be too high. Insurance agencies are concerned about providing collision coverage too fast because let’s admit it — a salvage car does not last for long.


Few Resale and Trade-In Options


No franchise dealer will buy a car that has a salvage-title. You have two options: sell the car to an independent dealership or a private third party.

And this is why buying a salvage-title car from a dealership, or anyone else for that matter, is not considered a good option. You will have to search high and low for insurance, and there’s no guarantee that you will get good coverage. If you are looking for a qualified insurance agent who holds years of experience in this field, then visit Pawson. We provide different types of car insurance policies with additional coverage as well. To know more about their policies or talk to their customer service representative, contact them at 203-481-8898.

Speak with a Pawson agent for free and get Connecticut-specific insurance advice on demand.

Speak with a Pawson agent for free and get Connecticut-specific insurance advice on demand.

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