Car Insurance Quotes

So you know a good bargain when you see one, eh? How about an '06 Ford Explorer with 10,000 miles for $15,000? How about an '05 Toyota Camry LE V6 with 30,000 miles for $11,000? It sounds like a good deal — until you find out you're driving stolen property or a vehicle that was in a major accident several months ago. Salvage yards and auction houses can offer dealers and consumers deep discounts on used vehicles, but you need to know the red flags that these blue-light specials can raise.

Cars in salvage yards are there for myriad reasons, none of them good. They've been recovered after a theft, stripped of all parts during a theft and left as a shell, or crashed badly enough that an insurer totaled them. Yet these cars are ending up back on dealership lots — sometimes with a clean title, sometimes with a salvage title — and then in your driveway.

A salvage title indicates that the car was totaled, usually meaning it sustained damage that exceeded 75 percent of its value. When a car has that much damage, only the best restoration can get it back in good working order, and even that doesn't guarantee the car is totally safe. Don't expect a salvage-titled vehicle to have a big red "salvage" stamped on it to warn you. Each state has different ways of classifying "title brands." Some in use are: reconstructed, rebuilt, restored, reconditioned, junk, unsafe, repaired and non-repairable.

"It's not realistic to think that a salvage vehicle is going to be put back together properly," warns Rob Painter, owner of Rob Painter & Associates in Wisconsin and an expert on auto theft and fraud. "Money is what talks. Lots of repairers will just slap the car together as quickly and as cheaply as possible."

Painter explains that a repairer of salvage vehicles often has lots of incentive to get the car off the lift and into the marketplace because many owners of salvage-vehicle repair shops also own auto dealerships. Part of the sale goes to purchasing more salvage.

"People are making a living out of that," says Bob Redding, Washington, D.C., representative for the Automotive Service Association (ASA), an auto industry group. And the zeal for profits often crushes safety assurance.

Salvage-vehicle safety: Laughable?

"The safety issue is the greatest question in the whole salvage-titling arena," says Redding. The safety of salvaged vehicles is hard to gauge because there's no post-repair inspection process set up that allows an independent, knowledgeable third party to review the vehicle's condition before it goes back on the road, says Redding.

Many states require you to have your car inspected at the DMV or by state police before it can go back on the road, but often the state police don't have enough experience to recognize safety problems. And in some cases, the repairer of the vehicle is the one who inspects it. "Some of the current post-repair inspection systems are laughable," Redding says.

"Clean title" doesn't necessarily mean clean

You can drop at least $20 to research a title history at one of many Web sites as a way of saving in the long run. Researching the history of a used vehicle you're about to buy is easy with online services such as CarFax and AutoCheck. In addition, the National Insurance Crime Bureau (NICB) makes it possible for car buyers to see whether a car has been declared a total loss by an insurer. NICB's VINcheck includes this data, and NICB represents over 1,000 auto insurance companies which cover 91 percent of the cars on the road in America today.

In many cases, you'll find the car's complete history. However, these services don't pick up every hiccup.

In testimony before the Senate Commerce, Science and Transportation Committee in April 2007, David Regan, vice president of the National Automobile Dealers Association (NADA) legislative affairs group, said that the players in this process "enjoy substantial profit margins by selling these totaled cars at inflated values because: 1) state motor vehicle titling laws are confusing, contradictory and incomplete; 2) auto insurance companies have a short-term economic interest in under-reporting total loss vehicle data; and 3) vehicle title histories are based primarily on an outdated, paper-based system that does not allow prospective purchasers to access title brand information prior to purchasing the vehicle."

"In addition," said Regan, "the vehicle history products in the market today are helpful, but a clean vehicle history report is not conclusive evidence that a vehicle has never sustained significant damage. Unfortunately, Departments of Motor Vehicles (DMVs) and title history services may never get information about vehicles totaled by insurance companies, since not all total loss vehicles are retitled to reflect the severity of the damage."

Cars bought from salvage yards or auto auctions can often come with "clean" titles, meaning the car sustained damage that amounted to less than 75 percent of its value. "Insurance companies push for clean titles because they can get more money at auction," says Painter. Auction houses, too, are motivated to offer "clean-titled" cars because those fetch a price two to three times higher than salvage-titled vehicles. However, those clean titles don't necessarily mean the car is any better than a salvage-titled vehicle.

Insurers will often total a vehicle at 65 percent to 70 percent of its actual cash value. "But there's nothing that makes a 70-percent damaged car better than a car that was hit for 75 percent damage," says Redding. If a car's air bags are deployed, the cost to replace them correctly is high, explains Redding, and can "get you to 75 percent of the car's value rather quickly." But one of your car's "major components" — a vague, subjective term, according to Redding — could be shot and the insurer will total your car, even though the damage hasn't reached 75 percent of the vehicle's value. It's conceivable that the car with the damaged component is in worse shape than the car in which the air bags deployed.

What's more, car dealers can "wash" salvage-titled vehicles through states that have lax titling and reinspection requirements. The dealer will repair the salvage-titled car and then export it to a state that allows the dealer to acquire a new, clean title. That vehicle can then be sold as a "clean-titled" vehicle, although it had, at one time, a salvage title.

Clean-titling isn't only the province of car dealers. Regan of NADA testified before the Senate that "many state titling laws do not require insurance companies to obtain a salvage title for every totaled vehicle. Moreover, the insurance companies have a powerful economic incentive not to obtain a salvage title. Insurance companies receive higher sale prices for these totaled vehicles at salvage auctions if the titles are not branded. As a result, DMV title databases do not include all totaled vehicles."

State Farm agreed to a settlement with 49 states in 2005 after it discovered it failed to properly salvage title thousands of totaled vehicles that it acquired since June 1, 1997, and that were resold by State Farm. Out of a $40 million settlement fund, folks who unwittingly bought the cars were to receive anywhere from a few hundred dollars to $20,000, depending on the value of the vehicle.

The "Passenger Vehicle Loss Disclosure Act"

Can one legislate this behavior out of existence? The "Passenger Vehicle Loss Disclosure Act," introduced in the Senate and House of Representatives in 2007, would require all auto insurers to publicly disclose every vehicle that has been declared a total loss. Disclosures would have to be "electonically accessible" to consumers and include the vehicle's VIN, date declared a total loss, odometer reading and reason for loss (e.g. flood, collision, fire, theft or other reason). The bills have been referred to committees.

The NADA has campaigned for this legislation and says, "The problem with totaled, flooded or stolen salvaged vehicles persists because state motor vehicle titling laws are confusing and incomplete. Insurance companies are not required to 'red flag' total loss vehicles for consumers. Also, buyers do not have enough timely access to title data from DMVs or total loss data from insurance companies."

Beware the VIN switch

Painter says unscrupulous car dealerships will purchase badly damaged vehicles at auctions simply for their Vehicle Identification Numbers (VINs). The dealership will then steal a car of the same year, make and model and replace the stolen car's VIN with the salvaged vehicle's VIN. Typically, the dealership will replace the VIN on the dashboard, under the hood, and on the driver's side door. This gives the dealership a car to sell without having to spend the money to repair it. The dealership can also give the buyer the title it acquired with the car bought at the auction.

Unwitting drivers who purchase these vehicles from dealerships, thinking that the transaction was on the level, may end up having their vehicles confiscated by police during routine traffic stops. The cars are identified as stolen and then impounded by the police, and typically the buyers have little or no recourse from state "lemon laws." Lemon laws enacted to protect consumers from buying duds generally expire after 30 days and don't protect you against dealership fraud.

Insurance un-easy

Betsy Bottino, a spokesperson for Liberty Mutual Insurance Co., says that you'll probably have no trouble acquiring insurance for a salvage-titled vehicle, as long as your insurer gets a copy of the DMV inspection certificate or a "garage report" (a certificate that an auto-repair facility will issue after it deems the salvage-titled vehicle safe for road operation).

However, some auto insurers will sell liability insurance but might not sell physical-damage insurance (comprehensive and collision) to an owner of a salvage-titled vehicle.

So do you roll the dice and take your chances? Painter recommends that you stay away from salvage vehicles altogether because "you never know what problems they're going to have. You won't know the extent of the damage — if it was flooded, or if the car was wrecked — how can you tell if it's really been fixed properly?"

Redding stops short of suggesting that you unilaterally reject salvage vehicles, but cautions you to find out the title history of any used car you're purchasing. And if it's been salvage-titled, have the car inspected by a knowledgeable appraiser before you buy it.