Generally speaking, traditional lenders are not willing to take on the risk of making a car loan on a salvage title. The reasoning is simple: a salvage title indicates that the vehicle had serious damage of one kind or another, often from an accident or collision. That means higher risk of future problems and maintenance. What if you’re not able to repair the car and want to stop making the payments on a non-functioning vehicle? This may sound extreme, but lenders deal in risk and potential. Generally speaking, the risks of such issues are statistically higher for salvage-title vehicles.
Exceptions: When a Salvage Vehicle May Be Financed
There may be a few exceptions; however. If you are a trained mechanic or have knowledge in the area of body repair, you may be able to get a loan for a car with a salvage title. Having training in those areas shows the lender that you will be able to repair the vehicle well enough to pass the inspection needed to get a regular title and dump the salvage title. The exchanging of titles is only available in some states. You will have to check with your state’s motor vehicle department to be sure.
You need to keep in mind that any lender that does approve you for a loan against a car with a salvage title will only approve a limited amount. A vehicle with a salvage title is usually worth less than half of its clear-titled counterparts. This is typically not a problem, since you’ll be paying less for the vehicle than you normally would. Still, there could be a disparity between what you and your lender think the vehicle is worth.
After getting the loan, you will face the issue of finding an insurance company willing to provide the full coverage that a lender will require.