Can You Get a Loan on a Salvage Title Auto?
- According to AutoCheck.com, a salvaged title is produced by individual states when a car has been seriously damaged and the cost of repairs reach a certain amount above the fair market value. A vehicle also may be issued this type of title if an insurance company deems it to be a total loss. If such a car is repaired, the salvaged status may be reworded after a certified inspection. Regardless of the verbiage, finance companies pay close attention to these types of vehicles.
- A car is collateral for a lender. If you default on your loan, the bank can repossess your car and resell it to offset their losses. When it comes to reselling a salvaged title, however, the financial institution has much less opportunity to recoup their money. Because of this, most banks and credit unions are unwilling to loan any money on a salvaged title. If your credit is damaged, your chances of being approved for such a loan are even more narrow, as there's a higher likelihood of default.
Consider Your Options
- If that deal is just too good to pass up, consider liquidating or borrowing against other assets. If you own other vehicles that are paid off, you may be able to borrow against their equity. Only pursue this option if you are sure that it will benefit your overall financial situation. In general, you should be very cautious about investing in a depreciating asset, especially one that is worth less than market value.
Factor in the Future
- You might be getting a great deal, but be sure that it aligns with your long-term needs. If you don't intend to keep the vehicle for very long, consider the fact that it's already worth far less than its unblemished counterpart. Reselling a salvaged title can be difficult because of buyers' hesitancy. While you may be able to find a buyer, be prepared to part with it for significantly less than you paid. Deals like this typically make the most sense for drivers who plan to keep them for a long period of time and don't expect much resell value.