Keeping a totaled car: owner-retained salvage

How the settlement changes

Normally the insurer pays the vehicle’s actual cash value, takes the vehicle and sells it for salvage. If you keep it, the insurer has nothing to sell, so it deducts the salvage value from what it pays you. The Texas Department of Insurance explains it to consumers the same way: tell the company as soon as possible that you want to keep the car, and it will subtract the salvage value from the amount it was planning to pay.

An illustration, with made-up figures: if the actual cash value is $12,000 and the salvage value is $3,000, the payment for the vehicle becomes $9,000 before taxes, fees and your deductible are applied. You then pay for the repairs yourself.

Check the salvage figure

The salvage deduction is an estimate of what the damaged vehicle would bring at auction. Ask how it was calculated and ask for it in writing. Two numbers are now in play, the actual cash value and the salvage value, and an error in either one changes your payment. The actual cash value is disputed in the usual way, described in our guide to disputing comparables and condition adjustments.

Salvage and rebuilt titles

States record a vehicle’s history with title brands. The federal vehicle title database describes a brand as a descriptive label that a state assigns to a vehicle to identify its current or prior condition, and notes that vehicles with significant damage are often branded “junk” or “salvage”. States set their own brand names and rules.

The common pattern has two stages. A salvage title is issued when the vehicle is totaled, and a vehicle with a salvage title generally cannot be registered for the road. After repair, the owner applies for a new title, often called rebuilt, reconstructed or revived, which carries the brand permanently. The paperwork deadlines can be short. Florida, for example, requires an owner who keeps a total loss vehicle to forward the title to the state within 72 hours after the vehicle becomes salvage.

Inspection before it goes back on the road

Many states require an inspection before issuing the rebuilt title. Depending on the state, it may check that the vehicle is roadworthy, that the parts used were lawfully obtained, or both, and you may need receipts for major parts. Your state motor vehicle agency publishes the steps. Confirm them before you decide, because the cost and delay belong in the calculation.

Insurance and resale afterwards

• Insurance. Some insurers will not write collision or comprehensive coverage on a branded-title vehicle, and others limit it. Ask your insurer before you commit.
• Resale. A branded title stays with the vehicle and appears on history reports. Buyers and dealers pay less for branded vehicles, and some will not buy them.
• A future claim. If the vehicle is damaged again, its value will be measured as a branded-title vehicle.
• Loans and leases. A lender is paid first and may not release the title until the balance is cleared. A leased vehicle belongs to the leasing company, so keeping it is rarely an option.

When keeping it can make sense

Owner retention suits a narrow set of cases: the damage is mostly cosmetic, the vehicle is older and mechanically sound, you can have it repaired properly for well under the net payment, and you plan to drive it for years instead of selling it. It is a poor fit for structural damage, flood damage or airbag deployment, where safety and repair quality are harder to be sure of.

Remember that a repair estimate is only an estimate. More damage is often found once work begins, and that cost is yours.

Decide before you sign

Tell the adjuster early that you are considering keeping the vehicle, and get both the full settlement figure and the owner-retained figure in writing. Compare them using the pre-acceptance checklist. The parts of a settlement are explained on our total loss settlements page, and the terms are in the glossary. Title rules vary, so confirm the details with your state motor vehicle agency or state insurance department.