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Is Buying Back Your Totaled Car a Good Idea?

POR: adam karner
Car crash on city street

No one wants to consider the possibility of their vehicle being damaged and deemed a total loss. But the reality is accidents happen. Whether you are involved in a motor vehicle accident, or your car suffers flood, fire, hail, or vandalism/theft damage, a time may come when you’re faced with the question: “Do you or don’t you buy back a totaled car?”

Your decision concerning your vehicle’s future will depend on several factors and whether the financial information is in your best interests to keep it or walk away.

Understanding a Total Loss and Salvage Titles

After you file an auto insurance claim, the insurer will update the status to a “total loss” if the repair costs surpass your car’s actual cash value (ACV). In other words, the repair work ultimately costs more than what the vehicle was worth before the damage occurred.

But to reach this decision, the insurance company must first inspect the vehicle, assess its condition and structural damage, and comply with applicable state laws. Then, the insurer will compare the repair cost estimate to the state’s ACV threshold, which is often between 60% and 100% of the value of the vehicle.

The insurer will then declare the vehicle a total loss if the calculations exceed the threshold. In most car accident cases, inspectors find the vehicles unsafe to drive even if repairs are made. Accordingly, the owners take the payout and walk away with cash for their next new car purchases. Whoever holds the title can next apply for a junk or non-repairable vehicle certificate, which notes the car cannot be driven but may be used for parts or scrap metal.

Sometimes, however, a car will only have cosmetic damage even though the insurance company declares it totaled. Usually, this happens when the vehicle is older and has a decreased fair market value. In these circumstances, you may be able to apply for a salvage title to keep your car instead of having the insurance company take possession of it. A salvage title is a certificate that indicates a vehicle is repairable.

However, one can only drive, sell, or register it after restoring its condition and passing inspections and/or certifications to ensure it’s safe and insurable to return to the road. Once those conditions are met, the title can be changed from salvage to rebuilt. Still, not all states or insurance companies allow this option, so checking laws and company contracts is critical.

Assessing Repair Costs Versus Car Value

The amount of time and money it takes to fix a totaled car are significant factors to consider before deciding if repairs are worth making in the first place. The process of figuring it out begins with your insurance provider after you file an auto accident claim. One of the company’s adjusters will visually inspect the damaged car in person to assess the damage and repair estimates. Next, they will write a report noting the damage and repair estimates. The provider will also generate the vehicle’s actual cash value by reviewing mileage, wear and tear, depreciation, and any accident damage sustained before the new damage occurred. As soon as you have all the numbers, you can compare the cost of repairs versus the value of your car and decide which option is the most financially advantageous for you moving forward.

Calculating the Salvage Value of a Car

As noted, the money you pocket for your totaled car will be based on a set percentage of the car’s fair market value (the ACV threshold). Percentage thresholds vary from state to state, and the auto insurance carrier will “total” the car when the repair estimates are higher than the set percentage of the vehicle’s fair market value.

Still, not all states set a percentage threshold. Some, like Pennsylvania and California, use a total loss formula. In these instances, your payout will be the fair market value minus the salvage value of the car or what the insurance company gets for it at a junkyard. Consider the following total loss thresholds by state:

  • Alabama 75%
  • Arizona 100%
  • California – Total Loss Formula
  • Colorado 100%
  • Florida 80%
  • Indiana 70%
  • Kentucky 75%
  • Louisiana 75%
  • New York 75%
  • Ohio – Total Loss Formula
  • Oklahoma 60%
  • Pennsylvania –  Total Loss Formula
  • Texas 100%
  • Wisconsin 70%

If you want to get a jump start on the numbers for your totaled car, you can utilize tools on various auto research company websites like Kelley Blue Book (KBB) to estimate its fair market value. Simply enter the requested information—i.e., VIN, make/model, license plate number, year, mileage, zip code, interior features, etc. and click “Go.”

Now, say KBB estimates your car’s ACV at $14,000, and you live in a state with a total loss threshold of 75%. The provider must deem the vehicle a total loss if the damages cost $10,500 or more. How much money can you expect from your insurance provider for a total loss vehicle? Your payout will reflect the car’s ACV minus your insurance deductible.

The Implications for Future Insurance and Warranty

Insuring a vehicle with a salvage title can be much more challenging than getting car insurance coverage for a new or used car. Remember, these vehicles have more risks and an accident history because they’ve been “totaled.” Therefore, not all providers insure them. In fact, many of them don’t. But the ones that do often provide basic liability insurance for a much higher cost.

In fact, according to Forbes, insurance companies may even tack on surcharges or charge similar rates to a car with a clean title and better value to insure a vehicle with a salvage or rebuilt title because of the risks involved.

That being said, taking the time to repair a salvage title car and obtaining a rebuilt title can help make buying auto coverage easier. The requirements you must meet to get one varies among states and can include passing several tests and proper inspections to ensure the vehicle is safe to drive. But once the state issues the rebuilt salvage title, retaining uninsured motorist coverage and personal injury protection (PIP) becomes much more accessible.

Uninsured motorist coverage, which is also known as UM or UMBI, pays for medical expenses if/when you or your passengers suffer an auto accident injury that is caused by a hit-and-run driver, a driver without liability insurance, or someone whose auto insurer goes out of business or denies coverage. PIP, or personal injury protection, also pays for medical expenses and lost wages—to you and your passengers—in the event of a motor vehicle accident coverage, whether you’re at fault or not.

But what about your vehicle’s extended car warranty? Assuming you had coverage before filing an auto accident claim, will your contract carry over to the new salvage title? Unfortunately, it won’t. Any previous warranty coverage becomes null and void after a vehicle is totaled. However, retaining new extended warranty coverage for a salvage title vehicle is possible through the right provider.

Reliability and Safety Considerations

Safety and reliability ratings are among the most significant selling points when buying a new or used car. Everyone wants something that will get them to and from a destination safely—not a future filled with stacks of repair bills due to untimely breakdowns. However, once an automobile sustains significant damage, its safety and reliability decrease dramatically. Whether the cause is collision, theft, or flood damage, the effects can be severe and impact the car’s stability and resale value down the road.

While there are circumstances that favor buying a totaled vehicle with a rebuilt title, the hassles generally outrank the benefits. For instance, will more repairs pop up down the road? Can you successfully sell the vehicle and make a profit if you decide to sell it? And if something goes wrong, will you pay out of pocket for the repairs, or can you invest in an auto protection plan to help cover the repair costs? These are all questions you need to ask yourself before choosing to keep your totaled vehicle.

Coverage for a Salvaged or Rebuilt Car

Investing in a solid auto protection plan is one of the most beneficial steps you can take to protect yourself as a car owner, be it new, used, or salvaged. Why? Unexpected breakdowns happen at any time. But the likelihood is even higher when driving a salvaged or rebuilt car. You can nurture your peace of mind with a vehicle service contract from a reputable provider instead of fearing the potential what-ifs.

With an Advantage plan from Endurance, you can relax knowing your contract is fully customizable with coverage for salvage and rebuilt vehicles. Not only does the plan provide inclusive coverage for your car’s key components, but it also includes those listed in the Advantage Prime contract. Furthermore, you can choose your local certified repair facility while Endurance works behind the scenes to ensure the shop makes the necessary repairs. You even get benefits like 24/7 roadside assistance and rental car and trip interruption services in the event the unforeseen happens. In addition, you can save up to $3,500 on regular maintenance services, like:

  • Engine diagnostic exams,
  • State safety inspection services,
  • Tire rotations and alignment checks
  • Oil and filter changes,
  • Brake pad and wiper replacements, and
  • State safety inspection services.

Remember, not all extended car warranty providers cover salvaged or rebuilt cars. So, taking the time to research companies and explore the plans they offer and the prices they charge is essential.

Total Loss Vehicle FAQs

Can you negotiate the total loss value of a car?

Yes. Understanding the facts surrounding your vehicle is critical after your car has been totaled. If it’s still driveable, know your state’s laws and auto insurance contract. In the event you have the option to restore your vehicle, you will need to take all the necessary steps to ensure it gets back on the road safely and legally.

Does a totaled car affect credit?

No. A total loss vehicle will not impact your credit score rating. But failing to make payments on your car loan will. Suppose you still owe on your totaled vehicle. In that case, you are responsible for making those payments until your car insurance provider settles the claim. Like all loans, falling behind on payments can affect your credit.

Is it legal to buy back your totaled car?

It depends. Your state’s laws and insurance company’s contracts will determine whether you can legally buy back your totaled car. If your state permits it, you will need to refer to your insurance provider’s guidelines and how the company would calculate the salvage value.

Making an Informed Choice on Totaled Cars

Understanding your vehicle’s circumstances is critical after your car has been totaled. If it’s still driveable, know your state’s laws and auto insurance contract. In the event you have the option to restore your vehicle, take all the necessary steps to ensure it gets back on the road safely and legally.

Whatever you decide, Endurance is here to help protect your car from unforeseen breakdowns and can provide you with cobertura de garantía extendida (also called an auto protection plan) when many other providers will not. Contact our award-winning customer service team at (800) 253-8203 to request your FREE, no-obligation quote, or visit our website to see your price now.

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