Auto loans for cars with a salvage title
Key sockets
- A car with a salvage or rebuilt title is a car that has already been declared a total loss
- Many major lenders won’t give you a car loan for a car with a salvage or rebuilt title.
- . car as salvage or rebuilt
- You’ll have a better chance of getting a car loan for a payback car if you have spotless credit or a good relationship with a small bank or credit union.
Buying a car as salvage, that is, a car that has already been written off can be a great way to get a good deal on a vehicle, but it can be harder to secure a car loan. or getting car insurance when you’re dealing with salvage or rebuilt cars.
Still, salvage or rebuilt cars can seem like a tough business to pass up, because buying an auctioned salvage title or a rebuilt title can afford you a brand and a car model that would otherwise be way out of your price range. But if you’re planning on buying a salvage title, don’t rely on a car loan from a major bank or lender.
Lenders who would be happy to work with you on a car loan for a self-titled car might refuse to fund a salvage title outright, so try researching local credit unions and smaller neighborhood banks who might be willing to help. finance loans for salvage cars – especially if you already have a relationship with them. Even beyond financing, however, there are plenty of caveats to consider if you’re considering buying a car with a salvage title.
What is a salvage title?
If a car is in a serious accident, an insurance company can declare that car as a total loss. Usually, a damaged car will be considered a total loss if the cost to repair the car is equal to a certain percentage of the value of the car before the accident.
Some states set what is called a total loss threshold, which is a set number above which the vehicle must be declared a total loss. For example, let’s say your state’s total loss threshold is set at 70%. This means that if repairing a damaged car costs more than 70% of the value of the car before the accident, it must be declared a total loss.
Once a car is declared a total loss, it is assigned a salvage title. Many salvage titles are sold at auction – and you might think an auction would be a good place to snag a cheap car. But salvage titles cannot be driven until they have been repaired.
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A car with a salvage title that has been repaired, inspected by the state, and declared legally drivable again receives a rebuilt title. Remember, if you buy a salvage car, you probably won’t be able to legally drive it, or insure it, until it receives a rebuilt title.
Should you buy a salvage title?
There are many reasons why a car may be declared total: it may have been in an accident or damaged in a flood, it may even have been stolen and lost all its valuable parts. If you are considering buying and repairing a salvage car, it is important to remember that not all damage to the car will be visible. If you’re not a mechanic yourself, consult a professional to find out what work might be needed on the car and how much effort it will take to get it drivable again.
If you are considering buying a rebuilt car, meaning a car that has already been approved by the state as drivable, you should still have a mechanic examine the car. Just because it has been approved for the road does not mean that the car will not have problems.
And getting insurance for a rebuilt car will also be tricky – car insurance companies treat based on risk, and a rebuilt car, because it has already suffered significant damage, will send a red flag to companies. car insurance.
Some auto insurance providers simply won’t write a policy for a rebuilt car, while others will offer limited insurance or coverage at higher rates. Most insurers that will cover a rebuilt car will not offer collision or comprehensive coverage, instead, limited policies may only include third-party liability coverage, which is required in most states and protects you from the financial burden if you cause property damage or injure someone with your vehicle. If you are considering buying a car as a rebuilt title, contact your current car insurance company and ask if they will underwrite a policy for a rebuilt title before taking the plunge.
Learn more about getting car insurance for salvage or rebuilt car.
Get a salvage or rebuilt car loan
As we mentioned above, getting a car loan for salvage or rebuilt car can be tricky. Many major banks will not provide financing for salvage or rebuilt title. When you take out a car loan, the lender agrees to share an equity interest in the vehicle with you until you have fully paid off the loan.
Many lenders may not be willing to take the risk with a salvage or rebuilt car. Your best bet is probably a small local bank or credit union, especially if you already have a relationship with an institution like that. If they do rebuilt car loans on a case-by-case basis, you’ll have a better chance of making your case if you have an established relationship, or a stellar credit score.
If you can’t find a car loan for salvage or rebuilt cars, another option is to take out a personal loan to finance your purchase. Unlike car loans, personal loans are unsecured, meaning your car does not serve as collateral for the loan. For this reason, personal loans have much higher interest rates than auto loans and will cost you more over the life of the loan.
Buying a salvage or rebuilt title can be a good way to get a second car, especially if you don’t mind having a plan. But if you need to take out a personal loan to get one, or you’re not sure you can afford the necessary repairs, you might want to think carefully about whether this is the best move for you.
The deterioration of a car will not exempt you from having to repay your car loan.
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