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Should I buy a salvage title car?

How to decide if that low sticker price is worth the risk of hidden damage.

Salvage title cars are usually sold well below market value — but that doesn’t necessarily make them a good deal. Hidden damage and aftermarket parts can make them a risky investment. Looking at the car’s vehicle history report and having it inspected by an outside mechanic can help ensure you’re not stuck with a lemon.

How does a car get a salvage title?

A salvage title is issued when a car is deemed a total loss by an insurance company. This usually happens when the cost to repair the car is greater than its market value. However, a car can also be deemed a total loss under other circumstances, like if the repairs would be too time-intensive or if the car was stolen then later recovered.

How different types of damage can cause a salvage title

Damage is the main reason a car would receive a salvage title, but the extent of that damage can greatly vary.

For example, say an older used car that’s only worth $5,000 is involved in a minor accident that deploys its airbags and damages a rear body panel.

In this case, the cost to repair is greater than the value of the car, so it’s a total loss for the insurance company. And possible damage to the frame or other critical parts means purchasing that vehicle could pose a big safety risk if you’re involved in an accident.

However, the opposite could also be true. If the actual damage sustained to the car is minimal and easily fixed, you might get a good deal on the car without risking your safety.

3 common reasons a car receives a salvage title

If the car you’re looking at has sustained damage or needed extensive repairs, it’s likely because of one of the following reasons:

  • Natural disaster
  • Theft or vandalism
  • Car accident

The vehicle history report should note the cause of damage and any repairs made, but you can also check the mechanic’s records and repair estimates to get an idea of what has been done to restore the car into drivable condition.

What are the risks of buying a car with a salvage title?

You’ll find that there are quite a few drawbacks when it comes to buying a salvage title car. These include:

  • Actual damage could be hidden. Cars with salvage titles could come with hidden damage — or a salesperson may understate the full extent of previous damage. And because salvage title cars are bought as-is, you won’t have any legal recourse if it turns out things are more serious than you anticipated.
  • May risk your safety. Although not common, there have been some cases of dealers rebuilding salvage cars by using faulty aftermarket parts or other money-saving tactics. If you’ve found a salvage title car you love, be sure to have it inspected by a trusted mechanic before purchasing it.
  • Difficult to finance. It’s difficult to assign a value to a car that’s been rebuilt and given a salvage title. You may find it hard to find an auto loan provider willing to extend financing for a car that may break down soon after you purchase it.
  • Insurance premiums are higher. While you might be able to find liability and collision coverage for a salvage title car, you’re unlikely to find comprehensive insurance for repairs. And since it’s difficult to assign an accurate value to a salvage title car, your premium may be higher than normal.
  • Resale value is limited. Dealerships rarely accept salvage title cars as trade-ins. And many private buyers are wary of purchasing a car with a salvage title, so you may find it hard to sell when the time comes.

Is it worth buying a car with a salvage title?

There are 2 main benefits of purchasing a salvage title car:

  • Salvage title cars cost less. Salvage title cars are priced low, sometimes between 20% and 40% less than their market value. If you’re looking for a good deal — especially on a more expensive car — then this may be a good route. But it bears repeating: Have the car checked by a mechanic before you buy.
  • May not have much damage. If the car you’re looking at was stolen or only sustained exterior damage, then it may have fewer concerns than other salvage title cars out there. And if the car already had a low market value, it may have been deemed a total loss just because the airbags went off in a minor crash — even without any serious damage.

Should I buy a salvage title car?

Buying a salvage title car isn’t right for everyone. But you might want to consider it in one of the following situations:

  • You have a mechanical background and can repair minor-to-moderate issues.
  • You know the seller and why the car was deemed a total loss.
  • You plan on driving the car as long as possible, without reselling it.
  • You can’t qualify for traditional financing and need to pay cash for a cheap car.

How to buy a car with a salvage title

Just like with any used car, you’ll want to know the car’s past damage and ownership history before you buy. Follow these steps when purchasing a car with a salvage title:

  1. Request a vehicle history report. This will note any previous damage that’s been reported to the insurance company as well as information about why the salvage title was issued.
  2. Note past damage and repair records. Ask the seller for repair records and previous mechanic estimates. This will tell you what work has already been done on the car to give you an idea of whether you’re getting a good deal.
  3. Have a mechanic perform a full inspection. Contact a trusted mechanic for an inspection before you buy. If the current owner or dealership isn’t willing to let you have the car inspected by an outside mechanic, you should look elsewhere.
  4. Take it for a test drive. Get behind the wheel and take the car for a test drive. This will give you an idea of how it handles and any potential problems to consider before purchasing.
  5. Compare financing options. Depending on the condition of the car and whether you’re buying from a dealership or private seller, you might not be able to qualify for a car loan. In that case, you should consider your personal loan options instead.

Once your financing is secured, work with the dealership or private seller to complete the paperwork and transfer the vehicle into your name.

Compare car loan options

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
CarsFast Car Loans
4.90% to 29.90%
12-96 months
Min. income of $1,800 /month, 3+ months employed
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs. Apply online to purchase a new or used vehicle and get the vehicle delivered to your door.
Loans Canada Car Loans
0% to 29.99%
3-96 months
Min. income of $1,800 /month, 3+ months employed
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Car Loans Canada
3.99% to 29.95%
12-84 months
Min. income of $2,000 /month, 3+ months employed
Search thousands of vehicles online, including $0 down options, from dealers across the country and get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
Coast Capital Car Loan
18-84 months
Able to service debt payment of $300/month
Finance or lease both new and used vehicles with competitive rates and flexible terms from one of Canada's largest credit unions. No credit union membership required for this product.
Canadian Auto News
3.99% to 29.95%
12-84 months
Min. income of $2,000 /month, 3+ months employed
Answer a few simple questions to get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
LoanConnect Car Loans
9.90% to 46.96%
3-120 months
No min. income requirement
Get access to 25+ lenders through LoanConnect's brokerage. Receive pre-approval in as fast as 60 seconds and get your funds in as little as 24 hours.
Canada Auto Finance
3-96 months
Min. income of $1,500 /month, 3+ months employed
Canada Auto Finance is a broker that connects borrowers with partnered local lenders. Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
Carloans411 Car Loans
1.90% to 19.99%
Up to 72 months
Min. income of $1,600 /month, 3+ months employed
Get connected with suitable lenders through CarLoans411. Finance your next car, van or truck with loans available in amounts from $500 to $50,000. Check eligibility for this loan through LoanConnect.
Fairstone Secured Personal Loan
19.99% to 23.99%
36-120 months
Established credit history and own your home
Fairstone offers secured personal loans up to $50,000.

Compare up to 4 providers

Bottom line

Buying a car with a salvage title isn’t necessarily a bad idea, but it’s critical you do your due diligence to ensure the car is safe and won’t break down in a few months.

Once you’ve got a car in mind, compare your car loan options or consider a personal loan to find a lender willing to work with you.

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