I’ve had several guys PM me about how to buy a salvaged car or what the risks are in buying a salvaged car after posting about getting a good deal on a 2012 Avant with 55k miles and having previously purchased a dozen or so salvaged cars in the past. I’ve also had several guys on the forum post that they would never buy a salvaged car and anyone who does is a complete idiot because those cars are basically worth nothing and are ready for the scrap yard! Well I’m here to share some info s and shed some light on exactly what a salvaged car is and why it’s a good fit for some people.
First and foremost let me say I’m not a “wrencher”. I’m a regular guy with a 9-5 just looking to save a few bucks so the kids can go to college. I love cars and like having nice cars, but I don’t own any tools, I don’t work on cars, and I don’t fix or repair cars and never have. My older brother could build a car from the frame up and he’s the one who’s essentially helped me understand cars at a high enough level to go out and buy a salvaged car from auction. He also help me build my list of contacts from repair shops, body shops, painters etc all whom I call on when I’m ready to work on a new project. The most important thing I’ve learned over the years is some cars are better to buy then others because labor is cheap and you rather pay for labor then parts. So even if you don’t plan on fixing a car yourself you can still end up saving a LOT of money. However if you can do any of the work yourself you’re going to save even more money!
Ok first off what is a salvaged car?? Basically a “salvaged” car is a car that has been written off by an insurance company as a total loss. These are cars that they are basically not willing to fix for various reasons. The misconception here is that the car is close to “totaled” or the frame is bent beyond repair so the insurance company doesn’t want to fix it. In the past that may have been common, but not today. I have a buddy who is a claims adjuster for a big insurance company and the stories he can tell about what they are willing to do to keep costs down would blow your mind. Basically each company has a formula they use to determine if a car is a total loss or not and majority of the time costs is only a small part of the formula. What most guys miss is repair bills are only part of the equation. Even if a car is repaired and there is no visible damage after the repair that car is now “marred” for life and the accident will always be on the vehicles history. As a result when you want to sell the car and the possible buyer runs a Carfax report they will see it was in an accident and repaired. This is a huge red flag for most buyers and a huge problem for the insurance company. Basically that car is not worth the same amount anymore when compared to a car that has never been in an accident. Because of this insurance company’s must also include an amount for what is commonly called "depreciation." That is, how much has the car depreciated in value because it was wrecked and repaired. This is the main reason why cars end up in a salvage yard. You also need to understand that if the accident wasn’t your fault you are not obligated to have a car fixed and don’t have to take a car back. If you want to be paid out for a car’s value BEFORE the accident that is your choice. Insurance companies don’t want you to know this and typically try and avoid payouts if possible. What ends up happening is they give you a low ball buy out to try and encourage you to keep the car or downplay the damage. If you and the insurance company can’t agree on a buyout number you can take legal actions against the insurance company and take them to court. Insurance companies try and avoid legal actions at all costs because most states the costs of car insurance is outrageous and most jurors and judges will typically not side with an insurance company trying to low ball grandma to keep her wrecked car. When this happens they will just pay you out regardless of how much it costs to fix the car and send it off to auction as salvaged even though there is very little damage. These are the cars you want to buy!
Now that you understand the true reasons why cars end up in salvage yards you need to understand that there are a LOT of cars to choose from unlike 20 years ago. Since the invention of the iPhone I’ve noticed one thing over the last 15 – 20 years of buying salvaged cars. The amount of inventory has increased 10 fold!! I think I bought my first “auction” car on site back in the late 90’s. Guys would show up on site early Saturday morning with paddle in hand in hopes to get one of the 20-30 cars up for sale. It was common to see a hundred or more guys all fighting over a few good deals which in the long run never ended up being a good deal after all the bloated auction fees and other BS fees. That’s not the case anymore. When millennials became old enough to drive it was next to impossible for them to simply put down their tweeting devices and just drive. As a result the amount of accidents has gone up a lot (and the costs of insurance) so the salvage yards are just spilling over with inventory. I live in California and between Copart and IAA there are 27 separate lots with over 6,000 cars for sale as I’m writing this! With the sheer amount of inventory available it’s simply a numbers game and the buyers are essentially paying less and less for salvaged cars. Even if you don’t live in a huge state with thousands of cars to choose from I’m sure you could still find a great deal. Another thing to keep in mind is you can also buy from other states and just have the car shipped to you, more on that later.
Ok now we know why cars are salvaged and we have a ton of them to choose from, but is a salvaged car right for you? If you’re the type of guy who likes to drive a brand new car just off the dealer’s lot and you just have to choose the specific color and the specific options and don’t mind financing a car for 5-7 years please stop reading salvaged cars are not for you. If you also like the reassurance of having a warranty and enjoy getting all your maintenance done at the dealer and not a local mechanic again these are cars won’t work for you. However if you typically buy used cars without a warranty and don’t mind taking your car to the local mechanic or better yet doing your own repairs keep reading. To put it in perspective here is an example of a project car I got last year that had very little damage other than the entire driver’s side scratched from front to rear and a cracked bumper. It was a 2008 CLS-550 amg sport with 83k miles on it. I probably paid more than I should of for the car, but I’ve always liked the design of the older 550’s and I knew it was a quick and easy fix so I wasn’t leaving without the car! The car new with all the options on it was $72k!! I got the car in 2017 for $5700 from a local copart yard. After auction fees, tax and registration and repairs I was out of pocket around $7500. The car’s blue book was at $16k. Keep in mind I didn’t do any work on the vehicle myself and paid to get the car up and running. I could have saved some money by having the vehicle wrapped instead of repainted, but I just wanted to get it back to the stock paint color. If this sounds like something you could drive or consider then keep reading.
The auction houses. There are 2 main companies to buy from, Copart and IAA. Copart has the biggest inventory, but they also sell private party cars so you really have to pick and choose what car your buying. IAA is much smaller and only works with insurance companies so you don’t have to worry about buying a car from a private party that may have hidden issues, but you also don’t have as many cars to choose from. Depending on what state you live in and what state the car is being sold in determines if you can by directly without a license or if you have to use a “broker” to buy the car for you. Both companies allow the general public to buy cars directly, but only from certain states. California for example doesn’t allow the general public to buy vehicles so if you don’t have a business license you must use a broker. A broker basically gives you access to bid on cars through their website. If you’re the highest bidder they buy the car and the same day sale it to you for a small fee and transfer the title to you. Everything is done online and is pretty quick and easy to do. Both companies allow you to sign up for a free public account. However if you want to bid you have to put down a deposit. If you put down a bigger deposit you can bid or the more expensive cars and more than 1 at a time.
How to pick the right car. Since I almost always us Copart I’ll provide info for buying from them and not IAA, but the process is usually pretty close for both. After you’ve signed up for your free account and you have found a car that you would like to buy just drive over and check it out in person. They typically have keys for each car and you are allowed to turn the cars on and inspect them, but you can’t drive them. If the car is not within driving distance you can hire an “inspector” to go out to the car and give you a full vehicle report. You can also run a car fax on the cars as they do provide you with VIN numbers. Inspector fees are typically between $100-$200 depending on the state the car is in. Most inspectors are pretty good and they know what things to look out for like frame damage. Since accounts are free you should also consider also bring a body guy or mechanic with you. Most of the cars I buy are quick and easy fixers, but I usually have my body shop guy check out the car as well. It’s nice because he can tell me in person what parts I need to replace and what parts he can fix and give me a rough estimate of repair costs on the spot. Keep in mind that some of the cars may have been sitting for several months so it’s always good to bring a batter jump start or call ahead and see if the lot has them on site for you to use.
Once you have inspected the car and you are ready to buy the only thing left to do is bid. Since these are online auctions you have the option to bid ahead of time or just bid during the live auction. With copart the bidding is fast and furious so be ready and don’t get suckered into a bidding war. If you are using a broker you will be bidding through the brokers site that’s linked to Copart. If you are the highest bidder at Copart that doesn’t necessarily mean you bought the car at that price. The seller may have a “reserve” or minimum bid. Basically the seller can approve or not approve the sale. Usually if your buying from an insurance company they try and counter bid your highest bid. So if you’re the highest bidder at $5k they may send you a counter and ask for $6k. You can either accept the $6k or counter them back. I usually decline to counter bid as I can always be the highest bidder again if the seller doesn’t take my highest bid and decides to relist the vehicle. However you also take the risk of other buyers coming along and bidding more so be careful.
Once you and the seller have both approved the sale Copart gives you a few days to pay for the car. Usually wire transfer. If your using a broker you pay them and they pay copart. Again usually wire transfer. After paying has been made you can’t simply drive the car off the lot because these cars are not licensed or registered. You have to either tow the vehicle off the lot yourself or hire a tow truck. If you’re out of state you need to hire a transport company to bring the car to you. After you have possession of the car you still have a few things to do. In California I have to get a smoke, brake, and light check. Then the car must be visually inspected at the DMV. After all is said and done you get new plates and registration and you have your car!
There are a few other things to learn along the way like the type of title a vehicle has, being careful of buying a cover up car, etc etc so if anyone wants more info let me know. I just wanted to give a brief (or not so brief) summary on the secrets to buying a salvaged vehicle!
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Originally Posted by rcolem87
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