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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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S.E.C. Commissioner Hester Peirce on the outlook for crypto regulation, and whether this will finally be the year we see a Bitcoin ETF.





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My husband doesn’t get along with my son. I brought most of the wealth into our marriage. How do I split my estate?

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Dear Quentin,

How do couples typically handle their estates in a second marriage? My husband and I have been married for seven years, and it is the second marriage for both of us. I have one adult child from my previous marriage; he has no children.

I brought the majority of our wealth to our marriage, including almost $1 million in my 401(k) and a nice home that is almost paid off; otherwise, we have no debt. My husband and I bought a second home together. We work hard to fund our new 401(k)s, and own a successful business together.

I am turning 65 this year, so estate planning is long overdue. My husband is five years younger than me, and we are both in very good health. We have two issues facing us: I see our retirement as living very comfortably on the monthly income generated by our 401(k)s, pension, Social Security, etc., and leaving whatever may be left to my son.


‘The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him.’

I am not interested in scrimping, but I want to be able to have enough money to last us until age 90 (or beyond) by not touching the principal. My husband is more interested in dipping deep into our savings, and living it up in retirement while we are young enough to enjoy it.

The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him, to the point that neither one wants anything to do with the other. As far as he is concerned, my son doesn’t meet his expectations, and so deserves nothing from me and certainly nothing from him.

I want my estate planning to be fair to both my new husband and my son. How do people typically handle this type of quandary? I think that I need to create some type of trust to pass on my share of our estate to my son. My pre-marriage assets involved my son as I pursued my graduate degree through night school and worked long hours throughout his childhood.

Second Wife

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Second Wife,

Don’t allow your husband’s feelings toward your son to influence your estate planning.

Your relationships with your husband and your son and your own plans for retirement are all fair game when making decisions about your estate, but your husband and son’s fractured relationship is their business, not yours. You worked hard for this money, and your son is your legal heir. Any effort by your husband to spend all of your savings and fritter away any inheritance that you intended to leave to your son should be resisted at all costs.

You have worked too hard your entire life to compromise your plans for a comfortable retirement where you have money set aside for long-term medical care insurance, unforeseen emergencies and/or your son. If you jointly own your home, you can leave your half to your son in your will, and specify it can only be sold after your husband passes away.

If you own the home, you can give your husband a life estate. Your son would pay capital-gains tax on the value of your home when he sells it, and not when you bought it. You could also make your son the beneficiary on your life-insurance policy, and/or gift him a certain amount of money per year to see how he manages and spends that money.

Figure out what is fair to yourself first before moving on to what is fair to your husband and your son. It’s OK to put your needs first. I caution against your dipping into savings at a rate that is beyond your own risk tolerance.

Ultimately, you are entitled to leave all other separate property to your son when you die — and, along with a financial adviser, set up a trust with that in mind for you, your husband and your son. Not necessarily in that order.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

Hello there, MarketWatchers. Check out the Moneyist private Facebook
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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.



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These money and investing tips can help you make a place for crypto in your portfolio

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you a better understanding of bitcoin and other cyrptocurrency, and help you figure out if digital currency has a place in your portfolio alongside stocks, bonds and other traditional assets.

Sign up here  to get MarketWatch’s best mutual funds and ETF stories emailed to you weekly!



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