How Salvage Titles Are Determined

Determining Vehicle Titles
So how is it determined whether or not a vehicle is a salvage title or a clean title? Well, the states have various calculations for how that’s done. Many times it’s if the damage is more than a certain percentage, 75% or 80%. Sometimes there’s other criteria.

Example from Connecticut
But here’s a good example. This happens to be from the state of Connecticut that describes the Connecticut total loss threshold and how that’s calculated. It’s important to understand how this is done because even if you purchase a vehicle that has a clean title, if the vehicle has damage, it could turn into a salvage title later for you. So you have to understand how this is done, what the calculation is, and there’s a lot of misconceptions about what makes a vehicle a salvage title.

Connecticut Statute 38a-353
Well, in Connecticut, the way that it’s done is this is their 38a-353 statute calculation of settlement amount in motor vehicle. Whenever a damaged motor vehicle has been declared a constructive total loss, the insurance help pay this. What is a constructive loss? What is the definition? Well, here it says right here, a constructive total loss means the cost of repair or the cost of both and salvage equals or exceeds the total value of the property at the time of loss.

Example Calculation
Now this may sound a little confusing, but here’s how it works. Let’s say if you have a vehicle that is worth $7,000, and I’ll just use some numbers, but you can plug your own numbers in. Let’s make it higher because it’s tough to find a $7,000 vehicle anymore. Let’s say a $10,000 vehicle, and it’s involved in some kind of an accident—minor sheet metal damage, couple airbags go off, maybe some glass broken—and the repairs are going to cost, let’s say, $6,000. And you might say, well, that’s a lot of money. Look, this day and age, almost any fender bender is going to cost $5,000 or $6,000. By the time you change out the bumpers, you do any frame straightening because everything’s unibody, you do paint, a lot of labor and paint, and especially when airbags go off. Airbags can be $800 or $900 per airbag to replace or to repack. So you have a minor fender bender, a couple of bags pop, you’re talking five or six grand. You might say, well, that’s only, you know, 60% of the value.

Salvage Value Calculation
However, what they do is from the $10,000, they subtract the salvage value. What is it worth right now? So if you look at that vehicle, that $10,000 vehicle that’s crashed, what is it worth in its current condition? Well, it may be worth more than you think because at auction there is probably going to be a salvage parts dismantler that is willing to pay $5,000 or $6,000 for that vehicle. And the reason why is because it still has a good engine, transmission, probably some body panels, computers, the other airbags. There are many parts that can be dismantled, but by the time they take those parts off, they could probably sell $1,000 worth of parts. But they have costs for dismantling, labor cost, shipping cost, retail cost, that kind of thing. So they’re going to pay probably $4,000 or $5,000 for it. So if they pay $5,000 and the repairs are another $5,000 or $6,000, that’s a total loss. It’s what’s called a constructive total loss. The car isn’t completely destroyed, but constructively, financially, it’s a loss.

DMV and Salvage Titles
And we’ve seen this happen with cars that even didn’t go through insurance. If you have a car that was damaged in an accident and you fix it, if there’s anything about that vehicle that brings it to the attention of the DMV, they’re going to flag it as a salvage. And if the insurance company didn’t make it a salvage, the DMV might.

Selling a Damaged Vehicle
How would that happen? Well, if you look to sell it in its current condition, and as part of that sale, most states have a requirement that the vehicle be inspected. Even if it’s just a VIN inspection or a safety inspection or emissions inspection, maybe you sell it to another state. Many states have a rule that says if you bring a car in from another state, we have to inspect it. Maybe it’s when you get insurance, they want to inspect it to make sure that it’s in good condition. Maybe you bring it in for service, and the service department says, we’re not sure if this car is safe for the road because we see there was some frame damage and they trigger an inspection. If that’s done, here’s what happens.

Connecticut Salvage Inspection
Here, we’re going to stick with Connecticut. Under that Connecticut total loss threshold salvage inspection information and this the same statute 38a-353, same one, State of Connecticut Department of Motor Vehicles. Salvage inspection locations: there’s two, Hamden and Wethersfield. Those are the two main offices. Wethersfield is their main branch. The capital of Connecticut is Hartford, but Wethersfield is close by, and that’s where they do a lot of them. They have one downstate in Hamden for people who don’t live near Hartford. They charge an inspection fee of $88. Okay, so far so good, not the end of the world. The owner must purchase and complete an inspection report, and there’s a form for that, B269, and validate it before presenting the vehicle for inspection. Be sure to allow enough time and have the inspection scheduled.

Inspection Requirements
You know, here this is a separate issue, but you notice they say right on it, MV907A is not acceptable by the Connecticut DMV. Any of you out there that have an MV907A from New York and are trying to bring it to another state, forget it. The other states don’t accept it because they require you to bring it back to New York to get it inspected there. A private individual cannot drive or tow the salvage vehicle to the DMV office, can only bring it in on a flatbed trailer or car carrier. No wheel of the vehicle may touch the ground, means you can’t use a tow dolly with two on the dolly, two rolling, can’t do that. Can be driven by a bona fide repairer with repair plates only when the dealer is the owner of the vehicle. However, if it fails, they got to tow it away. So if you’re a dealer and you put on dealer plates and you drive it there, cross your fingers because if it fails, you got to call a trailer. The owner of a vehicle that has been declared salvage cannot transfer ownership on an application for title. You must first obtain a duplicate title which says salvage and then sign it over to the purchaser. If it’s branded parts only or unrebuilt or re-registered under any circumstances, this is something you know we’ve talked about for years. Non-repairable, non-rebuildable, parts only, those cars are done.

Required Documents for Salvage Inspection
What do required documents for salvage inspection? You have to have that K1 186, it’s a salvage vehicle repair report showing what the major component parts are replaced according to industry standards. You have to present that so they have to see that the parts you put on are legitimate parts put on properly. Invoices, receipts apply, meaning that you have to have proof that these parts you put on are not stolen. You have to have photographs, clear photographs of the repaired area, and they must show the entire vehicle by at least four photos on each corner. The damaged areas prior to repairs. So if you already fixed it and you didn’t show what it was like before, you might be out of luck. The repaired areas with new parts prior to seam sealing, painting, or rustproofing. They want to see how it’s attached, how they come together before you cover it up with a bunch of junk. They want to see what happens, how the new parts were attached. If they’re welded, the area prior to painting and corrosion proofing, if it’s no longer visible, photographs must be attached. This is a hard thing to do.

Airbag Certification
You have to have an airbag certification statement if the vehicle is equipped with an airbag. A separate statement will be required in all cases completed by a dealer with proof of certification for all vehicles, regardless if the airbag was deployed or not. So if you have a vehicle that had major damage and the airbags didn’t pop, that’s good, you don’t have to spend the money for the airbags. You still have to get a dealer, a franchise dealer. Look, franchise dealer, what does franchise dealer mean? It means the manufacturer who built that car, a dealership from that manufacturer has to look at it. Not Joe’s Garage, not Bob’s Honda Repair, it’s Executive Chevrolet, like the new car dealer. How much is that going to cost you to bring it in and have them inspect it?

Insurance and Receipts
Insurance adjuster’s report if it was an insurance claim. Receipts for major component parts. Receipts are required for any major component parts that are replaced: engine, transmission, fender, hood, door, tailgate, trunk. You see what we’re talking about here, right? The receipts for these parts must clearly indicate the name of the source and the VIN if it was a used part.

Constructive Salvage
Again, this can kick in even if the insurance company did not report it as a salvage. If the calculation makes it a constructive salvage based on the total loss threshold. Remember, constructive salvage, what does that mean? Constructive total loss means the cost of repair exceeds the total value of the property. So about the only way you can get away with this is if you buy a crash car, nobody knows about it, you fix it up before anybody looks at it, and you can get it through the inspection without people realizing, wait a minute, this car was a major repair. Because if you bring it for even a casual VIN inspection or emissions inspection and somebody sees that there were major repairs done to it, it can get flagged. And even some dealerships will flag it because they don’t want to have the liability of that car being on the road if they put their hands on it, they touched it, they want to get it off the warranty too.

Lender Inspections
Sometimes lenders will want to have a vehicle inspected to make sure they’re lending money on a vehicle. So anytime you’re buying a car from Copart or IAA or one of these auctions, make sure that you know even if it’s supposedly a clean title and there’s no salvage brand on it or rebuilt brand, that any damage could trigger a salvage inspection even if you think you’re getting away with a clean title.

Triggering a Salvage Title
So these things can be triggered by the total loss threshold that might not be as much as you think. You might say, well, it’s under 75% damage. Well, you have to add back in the salvage value, what the vehicle is worth now. And if it crosses 75% with that, you’re done. That’s a salvage. And sometimes the vehicles that seem like they have a clean title, it’s just because the insurance claim hasn’t been through the system yet. Once that insurance claim gets into the system, then all bets are off. The towing company can report it, Copart can report it, lots of people can report it even after the fact. And you might find out later that you have to jump through a bunch of hoops to get your salvage vehicle approved.

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