Auto Loans

Salvage Title Car Loans are Possible, With Lots of Homework

By | Leave a Comment



Any kind of used car being bought should always be checked and checked again to make sure what is being purchased doesn’t include a bunch of repair headaches covered up with duct tape or Bondo filler. That said, if a person goes into the transaction with eyes open and knows what to look for, financing a used car with a salvage title can be a fairly inexpensive way to finance a viable set of wheels.

Cars with salvage titles are specific category of vehicles sales required by law. When a salvage title is applied to a car, it means something catastrophic has happened to the car to take it out of normal registration circulation. Many times, such titles generate on vehicles that were in areas hit by disasters. Flooding is the most common cause of the greatest number of salvage title cars to hit markets on a regular basis. Most states have rules on the books that convert a car to salvage title when the expense to repair the vehicle is more than 75 percent of what the car is worth. This is often triggered with older cars.

Obviously, a car that has sat in flood waters for an extended period of time has suffered damage, both externally and to the interior. Most people would sign off such vehicle to the dump and focus on cars with regular titles and no record of having been in a disaster. That said, cars, like most machines, can be repaired and brought back to functioning life to work quite well, albeit the aesthetics might need replacement in the form of new interior carpet, new seats, etc.

In many cases, if the owners was smart enough not to start the car and instead just towed it after the flood to the mechanic, the car engine is probably still fine, even though it needs a cleaning out. Many of the other components are in the same condition, only items covered with fabric or open access to containers will need draining or replacement. Where the flooding involved sea water, however, the salt can do far more damage causing corrosion, electronics damage, and wiring damage. By the time these cars get to market, someone has already done the repair work, and it’s just a matter of the customer checking out the details to determine if the work is complete or cosmetic.

To finance such vehicles with a cheap car loan, the following is needed:

1. The buyer needs to have an excellent credit score, history, and track record of timely payments of past debt.

2. He needs to find a lender who is willing to finance a salvage title vehicle, since the car is usually the collateral for the loan to be provided.

3. The loan found needs to be at a low enough interest rate to make the purchase worthwhile. It makes no sense to by a cheap car and then spend an enormous amount of money on loan interest.

When actually purchasing the vehicle, the buyer should make every attempt to get as much information about a given car as possible. This is important for two reasons:

1) the buyer should know if he’s getting a lemon or not, and

2) the salvage title financing lender will want to see the same information as well to gauge the appraisal value of the car involved.

Without very specific detail and certified reports from mechanics who have checked out the car and confirmed its status and repairs, most lenders will pass on salvage title loan unless the amount is very small.  Alternatively, some lenders may ask for some other kind of collateral to secure the loan, even if it is for a car.

In every salvage title case, a buyer should always do the following, even if it means a bit of work and fees:

1. Hire a professional, independent inspection by a certified mechanic. This can be done by having the mechanic come to the car location or have the car taken into the mechanic’s shop. Fees vary depending on the specific needs.

2. Always buy from a licensed, professional repair shop versus a private party or flighty roadside dealer. Professional businesses have their name at stake and won’t want to jeopardize their company and future prospects.

3. Always request the original repair invoices and documentation of work done. This provides a clear paper trail of what work was actually performed by licensed mechanics which can be independently verified. If the repairs were done privately, walk away.


Taking on a salvage title vehicle through financing or direct purchase often means the buyer will be stuck with the car until he disposes of it with a licensed car wrecker/hauler or another private buyer. The chances of being able to leverage a salvage title used car as a trade-in for a new car are almost impossible because these vehicles are so hard to sell in the first place. No dealer in his right might is going to want to take on the headache, even if it gets a sale with a new car. So buyers need to understand that committing financially to a salvage title car often means a long-term commitment until the car is parted out and destroyed.

In Summary

Salvage title cars and the loans that finance them are a gamble for everyone involved. By following the steps above, a buyer can help insure that he finds a better car at an affordable price as well as make it easier for a salvage title car loan to be approved. Detail and documentation are the keys to success in these purchases. The more paperwork that can describe repair and current status, the better everyone will be with a good purchase and repaired car.

Check to see if you will qualify for a car loan here.

About John Krystof

John Krystof writes about personal finance and money matters for He was born and educated in Central Europe, but presently resides in New York City.

Compare banks for mortgage, auto, savings and CD rates. Browse bank rates. Search locally or nationally for the best finance rates.
Search locally or nationally
Compare banks for mortgage, auto, savings and CD rates.