Salvage and rebuilt titles: what they mean for you

A salvage title goes on a car that was declared a total loss. Usually an insurance company decided that repairs would cost more than the car was worth, or more than a share of its value set by state law. In Arkansas, for example, that line is damage of 70 percent or more of the car's average retail value.

Not every salvage car was wrecked. Floods, fire, and theft can also lead to a salvage brand. A stolen car the insurer paid off and that was recovered later can carry one too.

A rebuilt title means a salvage car was repaired and passed the state's inspection so it can go back on the road. In Texas, that means safety and anti-theft inspections, and the new title says “Rebuilt Salvage.” Pennsylvania calls these cars “reconstructed,” and California calls them “revived salvage.” Rules vary by state, so check with your state's motor vehicle agency.

A junk or non-repairable brand is different. That car is meant for parts or scrap, and in many states it can't be titled for the road again.

Once a state brands a car, the brand becomes a permanent part of its record in NMVTIS, the national title database. Every future buyer who checks will see it, including the one you sell to.

• Price: a branded car should cost much less than the same car with a clean title. Kelley Blue Book says the industry rule of thumb is 20 to 40 percent less, and Texas DMV says rebuilt cars are worth substantially less.
• Resale: expect a lower price and a slower sale when you sell it. The discount doesn't go away.
• Insurance: Texas DMV warns that rebuilt cars are often denied insurance. Get a quote on the exact VIN before you buy.
• Loans: if you need a loan, ask your lender before you shop whether it will finance a car with a salvage or rebuilt title.

It can make sense if the price is far below the same car with a clean title, you can pay cash or already have a lender's OK, and you plan to keep the car a long time. You also need proof of what was damaged and how it was fixed, and a clean independent inspection.

To judge the price, compare it with clean-title listings for the same year, model, and mileage. If it isn't at least 20 percent cheaper, the low end of Kelley Blue Book's rule of thumb, pass.

Skip it if you can't line up insurance and any loan first, you plan to sell within a few years, or the seller can't show the repair history. Skip a car that was rebuilt after a flood too, because water damage to wiring and air bag sensors can show up later. Here's how to spot a flood-damaged car. Be extra careful with frame damage or a car whose air bags went off. Texas DMV warns that a rebuilt car can have problems that cost more to fix than the car is worth.

Do this before you pay for an inspection. It's free or cheap, and it can rule a car out fast.

1. Read the paper title. Look for a brand, the issue date, and the issuing state. On newer California titles, the brand shows in a red “Vehicle History” box near the top right.
2. Make sure the VIN matches on the dashboard, the driver's door label, the title, and the registration. If it doesn't, stop. Every report below is run on that VIN.
3. Run a title-history report by VIN. Reports from NMVTIS show brand history, insurance total-loss records, junk and salvage yard reports, and the latest odometer reading. Start with the VIN check above.
4. For a free second look, run NICB's VINCheck. See what free and paid reports each cover.

A total-loss record with no brand on the title isn't always a washed title. States brand differently, and some don't brand older cars. But the car was still badly damaged or stolen at some point, so treat it like a branded car.

The state inspection checks things like safety equipment and stolen parts. It isn't a promise of good work. California DMV warns that some revived salvage cars weren't properly repaired and may be dangerous, and some were fixed with stolen parts.

In California, if the car or its parts turn out to be stolen, the car can't be registered and the car or the parts will be seized.

• Damage history: ask what happened (a crash, flood, fire, or theft) and where the car was hit.
• Repair records: get photos of the damage, repair invoices, receipts for major parts, and the state inspection paperwork.
• Frame: have an independent mechanic or body shop check it. Texas DMV warns that a misaligned frame can wear out the drivetrain, wheels, tires, and brakes, and that some shops cut and weld pieces together to make a replacement part.
• Air bags: NHTSA, the federal auto safety agency, warns that some replacement air bag inflators put in after crashes were defective and have killed drivers. Have a dealer for that brand or a reputable mechanic check them, and don't open the air bag cover yourself.

California DMV also lists signs you can spot yourself:

• Signs of major repairs on the inner fender structures.
• Mud, mold, or rust under the trunk carpet.
• An air bag light that stays on, or air bag covers that look resealed or badly fitted.
• A VIN plate attached with anything other than rivets.
• Missing NHTSA labels on the doors, inside the hood, or on the tailgate or hatchback.

Be wary of a price far below similar cars, a seller who says the title is clean when the history shows a total loss, or a title issued recently in another state. Here's how a washed title works and how to catch one.

Many states require sellers to disclose a salvage history, but California DMV notes that's hard to enforce when a car comes from another state. Some states give buyers a way out when a dealer hides it. In Arkansas, for example, if a dealer doesn't disclose that a car is a salvage vehicle, the buyer can cancel the purchase and get a full refund. That law covers cars that were seven model years old or newer when they were damaged.