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Driving a vehicle is an essential part of life, but it is certainly a scary thing when you take a moment to think about it. And when you consider the possibility of a car accident, there can be some serious consequences for you and your vehicle.
This is made all the worse by the possibility of an accident being so bad that your beloved vehicle is declared a total loss. As soon as that happens, you’ve got some big questions to ask, including, “Is salvaging this vehicle worth the cost if its value drops?” and “Does a salvage title cost more to insure?”
Properly Calculating Salvage Value Against Repair Costs
Much like how the insurance company defines a salvage vehicle, predicting your car’s new value yourself (following a total-loss evaluation) is crucial to determining if it’s worth the repair at all.
Recovering from an accident can be hard enough, but can you imagine going to all the effort of repairing your beloved vehicle, only to find out that its new salvaged value is less than the cost of repairs?
Now you’re upside down in a car that could very likely have issues for the rest of its lifespan, all due to an unforeseen collision.
The insurance company is responsible for determining if your vehicle is “irreplaceable” for the amount of money it’s worth. This usually means an accident where the repairs outweigh its worth, but it could also mean that your vehicle is stolen and not returned within four weeks. In that case, the insurance would pay you for the vehicle.
Salvage titles could do a number on your vehicle’s value. It sticks out like a red flag and indicates that the vehicle could be host to hidden issues, which poses a risk to any potential buyers.
How do you calculate your vehicle’s salvage value? The good news is there are a couple of easy steps and multiple sources that you can take and use to get a ballpark estimation.
#1 – Determine the Kelley Blue Book Value of Your Vehicle
This step can all be done via kbb.com (the Kelley Blue Book official website).
By navigating through the platform, you can compare the KBB dealer and retail value. Simply input all of the information about your vehicle and select “Trade to Dealer” to first receive that dealer value. Then, go back and toggle the box to “Sell to a Private Party” for their estimated value should you try to sell your car to a private buyer.
Note: For a quick and dirty evaluation, some experts say you can simply deduct 40% to 50% from the retail cost to get the ballpark value of the salvage vehicle. You could also have it appraised by a reputable junk dealer, or you could sell it to a salvage yard.
#2 – Find the Average Between the Retail and Trade-in Value
The National Automobile Dealers Association can provide some great stats to help you find the middle ground between your vehicle’s retail and trade-in values. To begin their process, simply visit NADA’s website and click “Start Now.”
Similar to KBB, this site will ask you all about your car’s make, model, and year in order to pull its estimates.
It might be worth exploring other vehicle valuation sites as well like Edmunds, Autotrader, or Carfax. Each will provide a slightly different estimate. Then it’s up to you to find out what the average numbers are. It can also be beneficial to just stick with the most conservative estimate.
You can calculate your vehicle’s market value by adding the retail and trade-in value from one source and dividing it by two.
#3 – Determine Your Insurance Company’s Salvage Value Percentage
Insurers get the final say when it comes to a salvage vehicle’s value and they all have different formulas to evaluate them. Typically, they begin by comparing your vehicle to past auction sales of similar cars in similar conditions, as well as considering any money that went into repairs.
Begin by contacting your car insurance provider to learn what the percentage they use in salvage calculations is. Usually, it is between 75% and 85%. There may also be extraneous factors like vehicle repair cost, rental car charges, and part availability.
#4 – Calculate the Salvage Value
Once you’ve determined your insurer’s percentage used, multiply it by the market value you calculated earlier. This will determine your salvage value.
There is a little bit of flexibility, as salvage pricing can be negotiated with an insurance agent. So, if you are extremely dissatisfied with the evaluation, it could be worth a shot to discuss alternative pricing opportunities.
If you can prove a different value by highlighting things like mileage or vehicle modifications, you could receive an alteration to their determination.
Sometimes, if your vehicle is a total loss, even getting its value back leaves you in the red, particularly if it was a new vehicle. It depends on the interest rate of your car loan. GAP insurance in Florida and other states exists to protect your investment in such a situation.
Insuring Your Salvaged or Rebuilt Vehicle
Technically, if your vehicle has been declared a total loss, it can’t be driven on public roads. This means it can’t qualify for insurance. However, after refurbishments have occurred, the vehicle can qualify for a rebuilt title.
With a rebuilt title, your vehicle can be legally registered, driven, and sold. Now it is time to look into insurance options. Spoiler alert: It won’t be as easy to insure compared to a car with a clean title. In fact, most insurers will refuse to offer full coverage at all.
Often the best option for your vehicle will be a liability policy. Collision and comprehensive coverage might be impossible to receive because of how difficult it can be for an insurer to determine whether damages occurred due to the previous incident or a new one.
It can be more expensive and complicated to insure your rebuilt salvage vehicle. Some insurers will add an automatic surcharge of up to 20%. After that, you will likely be required to provide your new insurer with a certified mechanic’s statement, photos of your vehicle, and your car’s original repair estimate.
These let the insurer know that the vehicle is in good working condition, and they will detail all the original damages and improvements made to the vehicle.
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Luke Williams writes and researches for the car insurance site, CarInsuranceComparison.com. His passions include best practices for insurance and ways to make the most out of your car.
