
When your vehicle suffers severe damage in an accident, the insurance company may declare it a total loss. This means the cost to repair your car exceeds its current value (or the Total Loss Threshold in your state), making repairs financially impractical. But what happens to your wrecked car after it’s labeled totaled? The process may be more involved than you think, and understanding it can help you make smarter decisions when selling or dealing with a totaled vehicle.
Insurance Takes Ownership
Once your car is officially declared a total loss, the insurance company usually pays you the actual cash value of your vehicle before the accident. After that payout, they take ownership of the damaged car by having the title transferred to them. At this point, the vehicle is considered salvage, which means it has been heavily damaged and is no longer roadworthy in its current state.
Insurance Company Offers to Sell You Back Your Total Loss Vehicle
This is called an “Owner Retained Salvage Sale” and the insurance carrier will offer you your damaged car for a discount. Then, they subsequently brand the title “salvage” and/or report Total Loss History to all Vehicle History Reporting Platforms. This hurts the resale value significantly and will basically make the car worth 50% less than fair market value after it is fully restored. Owner Retain purchases rarely make sense unless the buyer has access to collision repair resources at a discount.
Salvage Titles and What They Mean
In most states, the wrecked vehicle is issued a salvage title by the Department of Motor Vehicles. This title brand is a permanent mark that tells anyone looking at the vehicle’s history that it was declared a total loss. A salvage title affects the vehicle’s resale value and insurance eligibility, as it signals that the car was once seriously damaged.
The Fate of Totaled Vehicles
After the insurance company takes possession, the next step usually involves selling the wrecked car at a salvage auction. These auctions attract buyers such as salvage yards, rebuilders, and dismantlers. Each buyer has different plans for the car:
- Repair and Resell: Some buyers specialize in fixing totaled cars. If the damage is repairable and can be done cost-effectively, these buyers will rebuild the vehicle and resell it. These cars receive a rebuilt or reconstructed title after passing safety inspections, allowing them to return to the road.
- Parting Out: Many totaled vehicles are stripped for valuable parts. Engines, transmissions, tires, electronics, and other components can be salvaged and sold individually. This approach often makes more financial sense than repairing the entire car.
- Recycling and Scrapping: Vehicles too damaged to repair or part out are sold to junkyards where they are crushed and recycled. The metals and materials are processed and reused, reducing waste.
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