Finance

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Should I Buy a Car with a Branded Title? Understanding the Pros and Cons

If you are looking to buy a used car, you’ve probably come across listings for cars with a “branded” or “salvage” title.  The price looks good.  The pictures look good.  But what exactly does the term mean, and, more importantly, should I buy a car with a branded title?  Let’s consider the pros and cons of this used car option.

“Branded” titles and “Salvage” titles are essentially the same thing, but it is becoming increasingly common to see the phrase “branded” title used by auto dealers.  This is because it has a more positive sound to it than the word “salvaged,” but make no mistake: you are looking at a salvaged car.  Now, that doesn’t mean you are looking at a bad car or a poor investment.  However, you do want to make sure you understand the advantages and potential disadvantages of a car like this as you consider a purchase.

While specifics can vary between states, generally a car with a branded title has been declared a “total loss” or “totaled” by an insurance company.  If you aren’t sure what a “totaled” car means, check out this article.

Pros of Branded Title Cars

Low cost 

Because of the cons that we will explore below, cars with branded titles have significantly lower price points than their clean title counterparts.  If cost is your primary consideration when shopping for a vehicle, then this is a pro that carries significant weight.  With the lower price point, you might be able to afford a make or model that would typically be outside of your price range.

The damage was not necessarily significant

When an insurance company totals a car, it does so because they don’t consider it economically viable to pay for repairs.  That does not mean, however, that there is no longer value in the car – it is a relative judgement.  The decision could have been part of a larger settlement that involves complicating factors like medical claims or property damage.

The damage could be purely cosmetic

It is also possible the car was totaled for cosmetic reasons.  Hail damage, for example, can cause a great deal of cosmetic damage to a car that can be expensive to repair.  The mechanical parts of the car, however, could be completely unaffected.  If you are more concerned with how a vehicle drives than how it looks, a branded title due to hail damage could be a great deal.

Low cost parts

If you are looking to buy a car for parts, the affordability of a salvaged car could lead to profit.  If your intent is to disassemble the car and sell the parts individually, then lower acquisition cost of a branded title vehicle compared to one with a clean title can be a great move.

Cons of Branded Title Cars

The Unknown 

While you can typically learn something about what happened to a car by the type of brand, you won’t find the details.  Only state agencies can brand a title, not individuals or private companies.  Some common categories of branded titles include Flood, Theft Recovery, Lemon, Collision, and Hail.  So, general information is available, but not the details.  Unless you have both mechanical skills and inspection access, you just can’t be sure of what you are buying.

Limited Insurance

The level of insurance coverage available will depend on individual insurance companies, so there are no definitive rules here.  However, many insurance companies will only offer limited coverage for branded title cars, if they will cover them at all.  Full coverage can be challenging because of the difficulty in assessing new damage from a claim versus prior damage before salvage repairs. 

Lower resale value

Even if you are ok with the cons of buying a branded title vehicle, that doesn’t mean someone else will be when it’s time to sell.  If you don’t plan on reselling or trading in the vehicle in the future, then this might not be a concern.  But if a future resale is part of your plan, be prepared for challenges.  For example, one challenge is that online pricing guides like Kelley Blue Book, Edmunds, or NADA don’t provide values for salvages.  From the NADA guides FAQ section: “NADAguides’ values assume a vehicle is clean. Appropriate deductions should be made for reconditioning costs incurred to put the vehicle in salable condition. NADAguides’ editors have not attempted to determine what, if any, effect a salvage title may have on a vehicle’s value.”

Fraud potential

There is always the potential for fraud, of course, any time you are buying something.  Buying a branded title vehicle, though, opens up more possibilities for would-be hucksters.  This is not to say that anyone selling a vehicle with a branded title is being dishonest.  There are absolutely reputable dealers who specialize in branded titles and are very forthcoming about their product.  Unfortunately, there are also those who will undersell the amount of the original damage or the quality of the repairs.  The bottom line for the consumer is that these vehicles are often sold “as is” and without any legal recourse if there was proper disclosure that the vehicle was salvaged.

Conclusion

Given the amount of unknown factors with regard to the original damage and the quality of the repair, buying a car with a branded title carries more risk than the typical used car.  When you combine that with likely insurance difficulties and poor resale prospects, a branded title car is probably not the best choice for the average consumer.  If, however, you have a lot of automotive knowledge and the ability to assess the quality of the rebuild, potentially take on some of your own repair work, and you can figure out the insurance, then the price discount could be well worth it.

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