How to Determine the Resale Value of a Salvaged Vehicle
Key Takeaways
7 minute read- Salvage titles indicate total loss vehicles with 75-90% damage that require extensive documentation, rebuilt classification, and potential inspection hurdles before becoming road legal
- Thorough research is critical - obtain verified history reports from Carfax or AutoCheck, hire certified mechanics for inspections, and verify repair quality with OEM parts documentation
- Calculate salvage value using multiple methods including the standard formula (Original Price - Annual Depreciation × Years), insurance multipliers (20-25% of clean title value), and damage-type adjustments (flood damage reduces value 50-70%)
- Market research determines profitability - compare rebuilt titles on multiple platforms, use KBB and NADA guides for benchmarks, and assess local demand from mechanics, enthusiasts, and budget buyers
- Maximize resale value through documentation - keep all receipts, inspection reports, and repair logs, obtain rebuilt title status, and run break-even analysis before purchasing to ensure repair costs don't exceed resale potential
After an accident, a vehicle is considered a total loss if the damage exceeds between 75% and 90% of its value before the accident. This can be caused by a fire, flood, a serious accident, or even theft. However, these total loss vehicles are not necessarily sent to scrap, and it is possible to acquire this type of car as restored and resell it for a good profit.
Understand what a restored title really means
When a vehicle is declared a total loss, it receives a restored title, and this can have some legal consequences, as restored titles may remain marked forever in many states, even after the car has been completely repaired. Therefore, restored titles require extensive documentation and may need to be classified as "restored" to be considered roadworthy.
There may also be some issues with insurance and registration, as some insurers refuse to provide full coverage for a restored car, making liability-only policies the only option. Additionally, some states may require the car to pass inspections after repair, VIN verification, and emissions testing to be roadworthy.
Obtain and analyze the vehicle history report
Since potential issues can arise with restored cars, it is important to properly research and analyze the vehicle history report. It is crucial to use reliable sources for information. Platforms like Carfax, AutoCheck, and NMVTIS can provide reliable information about ownership and accident history.
You should evaluate any suspicious aspects, such as repeated damage reports, lack of maintenance records, or multiple restored titles that may indicate a potential problem. You should also check the quality of the repair, paying attention to color consistency, shop receipts, and whether original or aftermarket parts were used.
Conduct a thorough inspection of the vehicle
If you are new to restored cars, there are three important aspects to consider in the vehicle inspection.
- Mechanical assessment: Even if you feel comfortable working with cars, it is worth hiring a certified third-party mechanic to check the safety systems, transmission, and suspension.
- Cosmetic and structural inspection: This includes evaluating the vehicle for chassis damage, misalignments in body panels, paint discrepancies, or poor-quality repairs.
- Functionality testing of systems: This inspection includes checking all electronic systems, safety systems, sensors, and emissions systems.
Determine the type and extent of original damage
To obtain an accurate resale value, it is extremely important to determine the type and extent of original damage. First, you need to classify the incident, as there are different issues depending on whether the vehicle was damaged by fire or flood, restored after theft, or involved in a front, side, or rear collision. This will also help you understand if the damage was structural or cosmetic. Structural damage will significantly reduce the resale value of the car, even if it has been professionally repaired. It is also important to understand that if the repair was done by licensed professionals using original parts, the restored car will have a higher value compared to a repair done independently using aftermarket parts.
Evaluate the cost of repair and restoration
The next step in determining the resale value of the vehicle is to assess the cost of repair and restoration. Start by listing unresolved issues, such as cracked windshields, transmission noises, warning lights on the dashboard, or rust. Then, evaluate the costs needed to obtain a roadworthy certificate or, if necessary, comply with emissions regulations. When you have these cost estimates, you will need to compare the investment in repairs with the resale value. If the purchase price and repairs exceed the resale value, this will result in financial losses.
Calculate the restoration cost using standardized methods
Now we can move on to the finer details of calculating the restoration cost for vehicles. The standard formula for calculating restoration cost is Initial price - (Annual depreciation x Number of years). For example, for a car with a value of $27,000 and a depreciation of 22% over five years, this would be $9,069.
You can also adjust the level of damage by applying additional reductions based on the type of damage. For example, cars damaged by floods lose between 50% and 70% of their value.
Finally, you can use insurance company multipliers. Many insurers use a formula of 20% to 25% of the market value of the clean title to determine the restoration cost.
Research comparable vehicles (comparability analysis)
The comparability analysis is an important aspect of determining the resale value of restored cars. It is a good idea to use several platforms, comparing similar listings by make, model, year, and mileage on eBay, Copart, Autotrader, and other platforms. Try to focus on listings with restored titles, considering restored cars that have similar types and conditions of repair. However, you will also need to adjust according to the local market. You should take into account geographic demand, engine type, equipment level, and any modifications. You can also use industry guides, such as Kelly Blue Book and NADA Guides, to obtain a market value standard. You can use this information to calculate the average value by adding the KBB and NADA values and dividing by two, before applying a restoration discount. For example, if the KBB value is $5,000 and the NADA guide price is $6,000, this will average $5,500. You will need to adjust according to mileage and the condition of the vehicle. If a car has higher mileage, its value will be lower, while excellent condition after repair may slightly increase the car's value.
Evaluate market demand and buyer willingness
The resale value of a car can also significantly depend on market demand. Conduct some research to assess buyer profiles, such as buyers for export, budget-conscious consumers, enthusiasts, and mechanics. You can reach out directly to buyers, negotiating directly using online platforms for greater profits, using auction history information to determine actual selling prices as a reference. Remember that you can obtain a professional assessment from a certified appraiser or a dealer friendly to restored cars for confirmation of value for any potential buyer.
Understand local rules and legality on the road
Before starting any resale activity, you should be fully aware of any local rules that may affect the legality of the car on the road. Some states require a full inspection and a name change before a car can be registered or resold. You must also legally disclose the restoration status of the car at the time of sale and change the title to "restored" if the repair meets state verification standards.
Calculate the final resale cost
Now is the time to take into account all the above information. Start with the value of the clean title, applying depreciation and subtracting the restoration discount, as well as adjusting according to condition.
You can also use three estimates:
- Comparability-based estimate
- Estimated value
- Return on investment cost for repairs
This will help you finally determine the resale range. For example, if the net value of the car is $10,000, subtracting a 40% restoration discount will give a maximum resale target, when the cost is fully repaired, of $6,000.
Tips to maximize resale value
Fortunately, there are several things you can do to maximize the resale value of a restored car. Document everything: Keep records of receipts, inspection reports, before and after photos, and complete repair records. This will help provide legitimacy to assist skeptical buyers.
Obtain a restored title: This certifies roadworthiness, increasing buyer confidence.
Get basic insurance: If possible, obtain some form of basic insurance, as even minimal coverage can help confirm legitimacy for potential buyers.
Conclusion: Is it worth selling or scrapping for parts?
This is an important question for anyone considering the purchase of a restored car for resale. Of course, there is no definitive answer, as you will need to conduct a break-even analysis, adding the purchase and repair costs and comparing them to the resale price.
You should also be aware of the implications of the vehicle's condition. If the engine or transmission needs to be replaced or there is chassis damage, it may be more sensible to get rid of the car. However, if the car can be properly repaired and there is demand in the market for the model, resale may be profitable.