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Too good to be true? How to buy a salvage-title vehicle

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The deals you might encounter on salvage-title vehicles these days are enticing — late-model SUVs and luxury sedans, often with low miles, advertised for thousands less than comparable clean-history vehicles.

The vehicles are clearly marked as having a “branded” title, a designation that has traditionally frightened off most shoppers, perhaps spooked by past ventures into the depths of Craigslist, where sellers spin tales of tiny little fender-benders that, somehow, led insurance companies to write off a late-model car.

They often turn up when you search online car-shopping sites and sort prices from low to high.

That’s because companies such as AutoSource, which has grown to 10 car lots in six states, Autolocity and dozens of local operators aggressively market branded-title cars as less expensive alternatives, complete with no-haggle pricing, financing and a limited warranty. Some will even arrange shipping across the country.

But is a salvage-title car any better a choice under the bright lights of a dealer lot?

What’s a salvage title?

The decision to “total” the vehicle (declare it a total loss) is made by the insurance company when it determines it isn’t worth fixing.

State laws vary but, in general, vehicles that have been damaged by an accident, flood, hailstorm or fire, are “branded” with a salvage title to warn future buyers that there was a significant problem.

Also see: What you should know about buying a used rental car

Traditionally, experts recommended avoiding branded-title cars. “It’s such an unknown,” says Mark Holthoff, editor at Klipnik.com, a community website for used-car enthusiasts.

Jeff Huang, sales supervisor at Westlake Financial Services, a national auto financing company based in Los Angeles, agrees. “The question is, what kind of components did the shop repair the car with?” he asks.

Still, he adds, “if you know the history of the car, there can be value there.”

There are a lot of reasons to proceed with caution:

  • It’s difficult to verify that the vehicle has been properly fixed.

  • Other problems may slowly appear, such as fading paint, rust, uneven tire wear, or poor driving dynamics, Holthoff says.

  • Pricing guides don’t provide prices for vehicles with salvage titles, so it’s hard to know what you should pay.

  • When it’s time to sell, most buyers will avoid branded titles.

  • Salvage-title cars typically don’t keep their factory warranty if any remains.

  • You may be able to buy a warranty of some kind, but it will be limited.

  • Not all insurance companies cover salvage-title cars.

  • Many lenders won’t finance branded-title vehicles (Westlake Financial is one of the few that does).

Should you consider a branded-title vehicle?

A salvage-title car might be a good fit for someone who understands the risks.

Resale value is uncertain at best, but that’s not an issue if you plan to drive the car for years. Financing won’t be a problem if you can pay cash or your credit is good enough to make a personal loan viable. The quality of repairs won’t always be obvious, but you’re willing to have the car inspected and research the car’s damage history.

In return, you can expect potential savings between 20% and 40% under market value, according to Kelley Blue Book.

Also read: The pros and cons of buying a certified used car

Bargain hunters shopping the branded-title market hope to find vehicles that suffered little or no damage. For example, if a car was stolen and had only a few parts stripped, it might get a salvage title, even though it could be restored to perfect running order. Hail damage can often be severe enough to total a car.

“Maybe some kid who wants a BMW
BMW,
-0.33%

 , but can’t afford it,” Huang says. “But he could buy one with a salvage title.”

For example, a salvage-titled 2019 Subaru Impreza Limited, with only 1,593 miles, was offered at $16,999. Without a salvage title, Kelley Blue Book estimates the car would cost $25,073 on a dealer’s lot. Assuming this Subaru
FUJHY,
+1.81%

  was correctly repaired — a vehicle history report described the damage as “moderate to severe” — a buyer would enjoy a nearly new car at a saving of $8,074.

Read: How to test drive a used car

That’s a lot of money. But it’s a lot of risk. You could wind up with an unreliable or even unsafe car that is hard to sell or trade.

Homework is critical

These rebuilt-title sellers make a living finding the right wrecked vehicles, repairing them and inspecting the result. But due diligence on your part is still essential:

  • Get a vehicle history report from Carfax or AutoCheck. Avoid cars where the report shows it was towed from the scene or where the airbag was activated. These both indicate a more serious accident.

  • Take any branded-title car you’re considering to a reputable body shop or mechanic for an inspection. First, Google the car’s vehicle identification number, or VIN, to bring up pictures of the car showing the damage before it was repaired. That will help an inspection focus on the right areas.

  • Be sure to ask the shop to look for frame damage that could alter the alignment of the car.

  • The test drive is crucial: Push every button and turn every knob. Take the car on the freeway to make sure it tracks straight. Find an empty road and hit the brakes hard.

  • Get a quote for insurance coverage before you agree to buy the car.

  • Read Yelp
    YELP,
    +2.61%

      or other reviews for the dealer.

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‘I could live on my Social Security and still save money’: This 66-year-old left Chicago for ‘calming’ Costa Rica — where he now plans to live indefinitely

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Editor’s note: This article was first published in September 2019.

A school break changed 66-year-old Martin Farber’s life forever.

In 2007, his daughter — who at the time was attending Illinois State University — decided she wanted to spend a college holiday volunteering in Costa Rica and staying with a local family, he explains. She came home raving about the experience, so, in 2008, Farber — who at the time was living in Evanston, Ill., just outside Chicago, and selling cars — took his first trip there.

“It was a big surprise to me — bumpy roads, dogs barking in the streets,” he says. “I wasn’t enamored at first.”

But as his daughter began traveling there more and eventually moved there for a year, he took additional trips to Costa Rica. It quickly grew on him — in particular, the people. “The Costa Rican people are warm, open and friendly. I felt less invisible in a strange country in a strange town where I didn’t speak the language than I did in Evanston.”

And the more time he spent there, the more it impacted him: “On one of my trips there, I thought: My daughter’s life makes more sense than mine,” he says. “There was nothing wrong with my life, but I felt that my life was out of context with who I’d become. … I would have bills and make money to pay them, but that had ceased to be satisfying,” he recalls. “I knew I needed to change my life — there was no more joy in what I was doing.”

What’s more, when he’d return from his Costa Rica trips, people noticed. “I would come back, and my friends and therapist would say: You seem better after you go,” he says with a laugh.

A view from the hot springs near Martin Farber’s home in Costa Rica.


Martin Farber

So in 2014, he packed up and moved to Orosi — a picturesque, lush small town with waterfalls and hot springs a little over an hour’s drive from San Jose — promising himself he’d stay for two years. It’s been five, and he now plans to stay in Costa Rica indefinitely. (Though Farber notes that, to him, “it’s not a retirement; it’s a chance to lead a new and different life.”)

Here’s what his life is like, from costs to health care to residency to everyday life:

The cost: While many expats spend way more living in Costa Rica, Farber says: “I could live on my Social Security and still save money.” He says “a person can live on $1,200 per month, two people on $2,000.” The key, he says, is to live more like he does and as the Costa Ricans do — in a modest home, eating local food and purchasing local goods.

Indeed, Farber himself spends just $300 a month for rent (he rents a home from a friend who moved recently and gave him a good deal), roughly $225 a month on groceries and just $50 a month total on water and electricity (the temperate climate in Orosi means you rarely need heat or air conditioning). The veteran Volkswagen
VOW,
+0.96%

 
VLKAF,
+0.98%

salesman saves money by not owning a car (those over 65 ride municipal buses for free), which can be a significant expense in Costa Rica; for his cellphone, “I pay as I go … roughly $10 may last me a couple weeks or more,” he says, adding that “many people handle there their cellphones this way. You can get them recharged anywhere.”

His major expense is travel: He goes back to the U.S. to visit his mother in Florida several times a year and lately has spent part of the summer in Chicago helping out a friend with a dealership there. He also spends a good amount of money on health care. He says that while flights can be had for as little as $350 roundtrip during offseasons, the cost can be much higher the rest of the year.

In the saddle.


Martin Farber

Health care: Farber, who has permanent resident status in Costa Rica, says he pays about $90 per month to participate in the country’s health-care system — adding that the health care he’s received has been very good. (A 2018 study of health-care quality and access in more than 190 nations ranked Costa Rica No. 62.)

When he developed a detached retina, though, he paid for the procedure out of pocket so that he didn’t have to wait for the required surgery, he says — adding that the entire procedure cost him about $5,000. “I would have had to have waited four days,” he says, if he had not paid to expedite matters. “That might have been fine, but it might not.” And he adds that the quality of care depends on where you get it in the country.

Lifestyle: Though Farber says that he “moved here with no goals and no agenda,” he’s found plenty to do. “I take Spanish lessons two days a week for two hours a day. It’s been great. I never thought I would acquire a usable language in my 60s,” he says. He also rides his bike all around the area, does some writing and belongs to a community group that undertakes projects to improve the area.

And he often simply takes in nature, which he says has been an essential part of why he feels calmer and more relaxed in Costa Rica than in the U.S. “I live at 3,000 feet but in a valley surrounded by coffee fields and lime trees and water. At night, if I open the windows, I can hear the river rushing by,” he says. “It is very calming … hundreds of trees everywhere … you know the Earth is alive.”

The historic Iglesia de San José de Orosi.


iStock

Cons: “I don’t want to overglorify. It’s not without its problems,” Farber says of Costa Rica. “There are social problems and downsides.” He notes that crime and petty theft can be a problem (“I am cautious,” he says of his approach) and seem to have increased since he moved there, and adds that he misses out on some cultural things because of where he lives. And, he says with a laugh, “I can’t order Thai food at 9 at night.” But, he adds: “These are trade-offs — in the afternoon, I get to walk in the coffee fields and see flocks of parrots.”

Residency: To qualify for Costa Rica’s pensionado visa, expats must prove that they have a pension of at least $1,000 coming in each month. (Here are the details of that program.) Once you have lived in Costa Rica for three years, you can apply for permanent residency. Farber used a lawyer to help him figure out the ins and outs of residency options; his entire path to permanent residency took about a year, he says.

The bottom line: “After five years I am still amazed and surprised that I made the decision to lead a life I never thought I would,” he says. And while he may not stay in Orosi forever — “the town doesn’t have an ambulance, [and] I don’t know what it will be like to be 80 there,” he says — he does plan to stay in Costa Rica in no small part because of the people and sense of community. “I have the feeling that life is good here,” he says. “It’s hard sometimes, but we are all in it together.”



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