Can You Buy Cars From Insurance Companies?
Last Updated on September 30, 2023
You may have heard about buying cars from insurance companies. Yes, it’s possible to buy a car from an insurance company.
Insurance companies sell vehicles at auctions, and drivers can buy these vehicles at a discount. However, many of these vehicles have been involved in total loss insurance claims and have salvage titles.
Typically, insurers do not sell vehicles directly to drivers. However, you may be able to buy a car through an insurance company’s salvage auction.
Today, we’re explaining everything you need to know about buying cars from insurance companies.
- Yes, You Can Buy Salvage Vehicles from Insurance Companies at an Auction
- How a Salvage Title Works
- How Salvage Title Vehicle Auctions Work
- What to Know Before a Salvage Vehicle Auction
- Why Buy a Salvage Vehicle?
- Can I Buy My Own Car from My Insurance Company?
- How to Get Insurance on a Salvage Vehicle
- Final Word on Buying Cars from Insurance Companies
Yes, You Can Buy Salvage Vehicles from Insurance Companies at an Auction
In most cases, you cannot buy a car from an insurance company directly. However, you can buy a car from an insurance company during a salvage vehicle auction.
It’s unlikely for an insurance company to sell a vehicle directly to you. Instead, many insurance companies hold salvage car auctions to get rid of unwanted vehicles.
When a vehicle is involved in a total loss insurance claim, it costs more to repair the vehicle than the vehicle is worth.
At this point, the insurance company sends a check to the driver for the value of the vehicle, and the insurance company takes possession of the vehicle under a salvage title.
When a vehicle has a salvage title, it means the vehicle is badly damaged and needs repairs. Those repairs exceeded the total loss threshold, which is why the insurance claim was a total loss claim.
Each state uses its own total loss threshold. Typically, the total loss threshold is set around 80% to 100% of the vehicle’s value. Once it costs more than 80% to 100% of the vehicle’s value to repair the vehicle, the vehicle is considered a total loss and the insurance company takes possession of the vehicle under a salvage title.
How a Salvage Title Works
Every vehicle has a title. When a vehicle has a salvage title, however, it affects the value of the vehicle.
If a vehicle has been involved in a serious accident, then it may have a salvage title. If the vehicle has never been involved in a serious accident, then it should have a clean title.
Let’s say you have two 2021 Ford F-150 trucks. They’re identical in every way. However, one has a salvage title, and the other has a clean title. The truck with the salvage title will be worth less than the truck with the clean title.
Even if a vehicle has been repaired, it retains the salvage title. The title may be a red flag for buyers because it indicates the vehicle has been damaged before.
Yes, you can repair a vehicle with a salvage title. However, it’s not in the insurance company’s best interest to repair the vehicle. It would cost more for the insurer to repair the vehicle than the vehicle is worth, which is why the insurer does not bother repairing the vehicle.
Instead of repairing a vehicle with a salvage title, the insurer will sell the car via an auction.
How Salvage Title Vehicle Auctions Work
Most car insurance companies do not sell vehicles directly to drivers. Instead, they sell vehicles through an auction.
Instead of holding onto salvaged vehicles, insurers will place salvage vehicles up for sale through a car auction.
You can also find other types of unwanted vehicles available for purchase at an auction, including repossessed, impounded, and abandoned vehicles.
Some companies specialize in salvage vehicle auctions. Salvage Direct, for example, hosts salvage vehicle auctions throughout the United States.
To find a salvage auction in your area, check online or look for advertisements in newspapers. Alternatively, you can contact local insurance companies or towing companies.
What to Know Before a Salvage Vehicle Auction
Although most auctions take place in person, you can find a growing number of online auctions. You may be able to bid on a vehicle from the comfort of your own home.
Before you buy a vehicle at a salvage auction, you can learn basic facts about each vehicle. You should be able to get a full description of the vehicle’s features, for example, a complete explanation of what happened to the vehicle and a detailed report on the interior and exterior of the vehicle.
You will not be able to take the car for a test drive prior to buying it at a salvage vehicle auction. However, you will be able to get a close inspection of the vehicle and look for issues like rust, frame damage, and fluid leaks.
Additionally, some salvage auctions are ‘blind’ auctions. You are not able to see the vehicle before bidding on it.
Why Buy a Salvage Vehicle?
Buying a salvage vehicle comes with several advantages, including:
Cost Savings: The biggest and most obvious advantage of buying a vehicle is that you can save money while getting a good vehicle. A vehicle might have structural damage exceeding the total loss threshold, for example, despite the vehicle being still driveable. It may not be worth it for the insurer to repair the vehicle. However, you may be able to repair the vehicle at a lower rate, giving you a good car at a discount price.
Spare Parts: Many mechanics and auto shops attend salvage vehicle auctions to get spare parts. Even if you don’t plan to drive the salvage vehicle, it may be worth buying for the spare parts alone.
Some Repairs Are Easier than Others: Repairing a salvage vehicle may be easier than you think. Although some salvage vehicles have extensive damage that will cost tens of thousands of dollars to repair, others have mostly superficial damage. They’re still considered to be a total loss despite the fact that they operate fine.
According to Car and Driver, the average salvage car is priced at around 25% of the MSRP of a car with a clean title. By taking advantage of an insurance company’s salvage auction, you could get a great vehicle at a discount rate.
Can I Buy My Own Car from My Insurance Company?
If your vehicle was involved in a total loss insurance claim, then you may be curious about buying your own car from your insurance company.
Yes, buying your own car from your insurance company at a salvage vehicle auction is possible.
However, anyone else can also bid on your vehicle at the auction. You may need to outbid other people to get your vehicle back.
It’s also possible to buy your car from your insurance company before the auction. Some insurers will deduct the value of the vehicle from your insurance settlement, for example, and return the car to you with its salvage title.
Whether you buy the vehicle at a salvage auction or directly from the insurer, it may be possible to buy your own car from your insurance company.
How to Get Insurance on a Salvage Vehicle
Even if your vehicle has been repaired, it retains its salvage title. You may be able to buy insurance on your salvaged vehicle, although this insurance works differently than normal car insurance.
Most insurers will not provide full coverage car insurance on salvage vehicles, for example (unless it’s a fully-restored classic car).
However, you should be able to buy basic liability coverage for your salvage vehicle, which allows you to legally drive on roads in your state. Unfortunately, few companies are willing to insure salvage vehicles.
Additionally, some insurers offer collision coverage for salvage vehicles, which means your insurer pays for any damage caused by a collision with another vehicle.
You need valid registration for your salvage vehicle before getting insurance. To obtain registration, you might need to pass a safety inspection. If your vehicle does not pass a safety inspection, you cannot drive the vehicle legally or obtain car insurance, and you cannot legally drive the salvage vehicle in your state.
Final Word on Buying Cars from Insurance Companies
Most insurance companies do not sell cars directly to customers. However, most insurers sell salvaged vehicles via salvage auctions.
At a salvage auction, you can buy cars with salvage titles. These cars have been involved in accidents that exceeded the total loss threshold. It’s not worth it for the insurer to repair these vehicles, so they sell the vehicles via an auction instead.
Look for salvage auctions in your area to buy cars from insurance companies.