When you purchase a vehicle from an auto dealership, especially if it is new or certified pre-owned vehicle, then you can expect to receive a clear title on the vehicle after all your payments are made. A clean title means the vehicle has never experienced major damage from an accident, vandalism, or weather. This indicates to a prospective buyer that they are receiving a vehicle with a clean history.
The two other types of car titles that you could have are a salvage title or branded title. For instance, there are certain situations which could change the clear title of your vehicle. Let’s say a major hurricane causes major flood damage to your vehicle. This could potentially turn your title into a salvage title. But if you purchase a vehicle that suffered damage, you may receive a bonded title. The title you have will depend on where you bought your vehicle and/or the condition of the vehicle. You will learn more about the differences between the two now.
When your vehicle goes through a major accident, the first thing you will do is contact your insurance company to file a claim. If the repair costs are greater than 50% to 90% of the vehicle’s value, your insurance company will likely pay you the fair market value of your vehicle and then just take possession of the vehicle. Since the repair costs are more than the vehicle is worth, it is cheaper for them to just pay you the market value. Once that happens, they will change the title status to “salvage.”
By law, any car with a salvage title cannot be driven. Insurance companies will usually sell them at public auctions where people purchase them for spare parts. If the buyer is a professional mechanic, they could potentially rebuild the entire vehicle so that it is in normal condition again.
When a salvage titled vehicle has been rebuilt or repaired to be drivable again, the status of the title can change from salvage to “branded.” Some states refer to branded titles as rebuilt titles, but they are the same thing. The status of a salvage title can only be changed after a certified state auto inspector looks over the vehicle and deems it drivable for the road.
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Some self-employed mechanics make a living from buying salvaged vehicles, rebuilding them, and then reselling them for profit. If you plan to do this, just be careful of the risk involved. When you purchase cars at an auction, you don’t really know how bad a shape they are really in until you take possession of them.