Ever been tempted to buy a Rebuilt Salvage vehicle? Formerly wrecked but now legal to drive, the former Salvage vehicle might be substantially less expensive than another similar vehicle without that designation. I would caution you: Rebuilt Salvage vehicles are the fool's gold of the automotive world.
To get the big picture on this, I spoke to a Michigan State Police Trooper who often inspects salvaged vehicles and certifies them to get their "Rebuilt Salvage" designation.
In Michigan, if an insurance company deals with a "distressed"vehicle, it will be designated "Salvage" if the cost to repair it falls between 75% and 90% of its pre-damage value. More than 90% is considered unsalvageable. If less than 75%, it's a fixer-upper. Most states follow a system like this but those percentages vary from state to state. Find out what it is in your state – your government website should have the info – before you consider dabbling in Salvage or Rebuilt Salvage vehicles.
A typical Salvage vehicle is one that was in a severe accident, suffered heavy flood damage, or was stolen and stripped. Suppose your late model Beemer gets T-boned and you live to walk away from it. The insurance company deems it unfixable and quickly pays you a fair settlement. Ha ha! I'm kidding of course. Instead, they will lowball you and see how long you will haggle with them before they finally give you just enough money so you won't sue them. Then they cut you a check and take possession of your pile of German-born scrap.
They sell the wreck at auction and the new owner will get a Certificate of Title prominently branded "SALVAGE." The Michigan Salvage title is orange. Normal titles in Michigan are green, so this is the first hint that this vehicle has issues, in case you are a lazy reader and didn't notice the Salvage designation. (i.e., the Title is tl;dr.)
A Salvage vehicle is not eligible for a registration and cannot be legally driven in the state of Michigan, even if it is drivable. For example, suppose a car flooded and was deemed a Salvage. After sitting around for a few weeks it dries out and the primary damage is a swampy interior, a ruined finish, and a trunk full of dead carp. If the car was drivable, it still cannot be registered. To get a Salvage vehicle legal to drive, it must be certified as "Rebuilt Salvage" by a state authority. In Michigan, that person would be a specially-trained law enforcement officer, often a Michigan State Police Trooper. I interviewed one such person, Trooper Seth Swanson. Swanson answered my questions and explained to me how this all works.
You buy a Salvage vehicle and do what needs to be done to rebuild it. Replace missing or damaged parts. Straighten the metal which can be fixed, maybe unbend the frame a bit. Replace broken window glass. You consider the car fixed. You call an inspector like Trooper Swanson and arrange for the car to be inspected. The fee is $100, set by the state. You bring the car to the appointment (but don't drive it there) and Swanson spends an hour or two looking it over.
Swanson inspects your paperwork. You must fill out a form (TR-13A) which lists the parts which have been replaced and repaired. Replaced parts must be accompanied by paperwork proving where the parts came from and when they were acquired. The entity which did the repairs must also be disclosed. Swanson will review the paperwork and the car to make sure everything is legit. He will also ask to see the receipts for the parts which were put onto the vehicle. If parts bear VINs, he will check those out as well. Don't be surprised to see him climb under the car to look at a VIN. What is he looking for?
"I'm not there to see if the car is safe to drive. All I'm doing, basically, is facilitating an inspection that shows that the parts that are on it aren't stolen."
The car is not inspected for roadworthiness, rebuild quality, or to see if it is "back to normal." The inspector is looking at the car to confirm that it is complete (for the most part) and that none of the parts on it – which can be traced – are stolen. And as for completeness, the inspector is looking at the obvious stuff: all of the windows, body panels and then some basic systems like headlights, tail and brake lights, horn, windshield wipers and the exhaust.
The exhaust is interesting because it is the only system the inspector checks which requires the engine to be fired up. The inspector will ask to hear the car run to be sure the car is not too loud but the car will not be driven by the inspector.
But is it safe to drive? The inspector does NOT rule on that. The car could still have a bad transmission, a funky electrical system, missing airbags, or a bent frame. But, it will be certified as "Rebuilt Salvage" and the owner can now obtain a title for the car which will allow for a registration and license plate for the car. The owner can then drive the car or sell it.
I asked Trooper Swanson what he would recommend someone do if they are considering the purchase of a Rebuilt Salvage vehicle. "If you know a good mechanic, or maybe a good bodyshop, your best course of action is to have someone fully look at that car and do a thorough inspection, make sure everything is in good working order." The key word there is everything.
To locate an inspector in the state of Michigan, visit the website. Swanson is listed in Oakland County but he handles them in neighboring counties as well.
I've seen quite a few cars with Rebuilt Salvage titles and they have run the spectrum, from cars which looked immaculate to cars that looked like funhouse mirror reflections. Are they a good value proposition? Depends. A potential buyer of a Rebuilt Salvage vehicle must keep in mind a few things. The first is that the title designation will substantially impair the value of the vehicle to any future buyers. If you are fine with it – that's one thing. When you go to sell the car, you will have to deal with it. And you may have issues with insuring the car because of the title. While you probably can get insurance for it, the types of coverage will probably be limited and possibly more expensive. Call and find out before you buy the car.
The second issue is that you do not know what you are getting into with a Rebuilt Salvage vehicle until you have the vehicle thoroughly inspected by a qualified mechanic. And not just a typical walk-around and short drive inspection. The car could have bizarre deficiencies because of its history. Like I mentioned above, it could have missing airbags, water-damaged wiring harnesses, or deformed suspension parts. Those carp might still be in the trunk.
There are some other aspects to this. For example, Michigan law only applies to cars that are no older than 7 years. It will likely be different in other states. And a recovered stolen vehicle might be "Salvage" even if the damage is below the 75% threshold. No one said any of this makes sense.
But the main thing you need to find out is what exactly is meant by the "Rebuilt" certification (or its equivalent) in your state. If it's like Michigan's, the designation might not mean what most people think it means. Approach these cars with caution.
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Steve Lehto has been practicing law for 23 years, almost exclusively in consumer protection and Michigan lemon law. He wrote The Lemon Law Bible. He also wrote Chrysler's Turbine Car: The Rise and Fall of Detroit's Coolest Creation. You can hear his podcast Lehto's Law here.
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