CarFlingAsks William Miller about salvage vehicles.
CarFling Asks, "What's the deal with salvage vehicles?"
Lately, there has been a growing trend of salvage vehicles being purchased, "fixed up" (note the inverted commas), and resold to unsuspecting customers. Unfortunately, many buyers drive away after signing a binding voetstoots agreement only to discover that the car they purchased is not what they thought it would be.
In Afrikaans, there is a saying that goes, "Mooi van vêr, maar vêr van mooi." It means that a car may look beautiful from afar, but in reality, it is not as attractive as it appears.
So, what's the big deal with salvage vehicles? Let's delve into the details.
In the past, dealers had access to extensive information about the true history and condition of traded-in vehicles. When a vehicle was presented to a dealership, the sales executive could easily see the extent of damage, the repairs that were done, and the evaluation conducted on the car.
Insurance companies and auditors would assign a code to a vehicle based on its physical and mechanical condition:
- Code 1 = the vehicle was new.
- Code 2 = the vehicle was used.
- Code 3 = the vehicle was rebuilt or salvage.
These codes made it easy for dealers to understand what they were buying. If you were purchasing a Code 3 vehicle as a dealer, you were aware of the risks involved.
However, five years ago, access to this detailed information was restricted to comply with POPI rules and regulations. Due to the lack of information available to dealerships and consumers, neither party can easily investigate whether a vehicle of interest is in fact a salvage vehicle. This leaves both parties at risk of unknowingly purchasing one.
Let's break down a salvage vehicle scenario:
- A vehicle is involved in an accident or becomes the victim of a natural disaster.
- The owner makes an insurance claim, and the insurance company determines whether the vehicle is worthy of repairs or not.
- If the vehicle is deemed irreparable, it is titled as a write-off or salvage vehicle.
- The salvage vehicle is then sent to an auction where dealers or consumers can bid and win the vehicle.
- The buyer repairs the vehicle and puts it back on the market for sale
Salvage vehicles are usually bought at a low price, repaired, and then sold at a much higher price, resulting in a significant profit for the seller.
One should note that these repairs are often done according to the standards of the seller or their mechanic. The repairs are not necessarily done according to the standard of the manufacturer as it might end up costing more to repair and leaving the seller with less opportunity to make a good profit. This strategy of repairing the vehicle according to personal preference can deceive unsuspecting customers who are enticed by the seemingly good deal. When buyers are looking to purchase a vehicle, conducting a proper viewing of the vehicle is a wise thing to do. During the inspection, the seller can disclose any discrepancies surrounding the condition of the vehicle, this includes disclosing its status of it being a salvage vehicle.
When the buyer is fully informed about the vehicle's condition, it is their final decision to walk away or take on the challenge of sporting a salvage vehicle.
When investing in a salvage vehicle, there may be some advantages to it - especially if you’re running in social circles of avid car buyers and sellers who enjoy the thrill of buying, fixing, and selling auctioned salvage cars.
You’re able to buy it at a low price and sell it according to your budget to the next avid car buyer. However, if you're new to the trade, there are various risks to consider that accompany a salvage vehicle purchase. These risks may include damaged mechanical parts that are expensive to repair, underlying irreparable issues, occurrences of rust, and more.
The danger lies in the fact that many of these issues lie dormant until the buyer merrily drives away.
And while there is protection for consumers to fight against these unfortunate events, we all know that legal battles are no fun at all.
So, here are some tips for you to easily spot a salvage vehicle:
- Look for a salvage title disclosure in the paperwork.
- Obtain vehicle history from reputable sources.
- Check the Vehicle Identification Number (VIN) to reveal information about the vehicle's history.
- Arrange for a professional inspection to assess the vehicle's condition thoroughly and identify hidden damages or signs of poor repairs.
- Pay attention to bodywork, such as misalignment of panels.
- Consider where the vehicle was purchased from—reputable dealerships or private sales.
Taking these steps is important to protect yourself as a consumer from blindly entering a deal that you took in full faith without facing the possibility of being scammed or sitting with a vehicle that you have no idea how to repair and restore.
Alternatively, you can speak to a licensed mechanic or automotive expert that you trust to guide and assist you through your buying process. Most of us don't have 15 years of automotive experience, so it's always a wise decision to have an expert thoroughly evaluate a car before committing to it.
It's easy to fall into the trap of buying a salvage vehicle that looks appealing and comes with a tempting price tag.
In a world of rising living costs, we all want to save money while still purchasing quality items. However, when searching for low-cost, high-quality goods like vehicles, it's crucial to remember one thing:
✏️ There aren't usually bargains out there unless there's a story behind it.
At the end of the day, always be mindful of what you are buying. It may not always be as it seems. The vehicle that may be listed as Code 2 could actually be Code 3. The spiffy-looking vehicle that seems to be in tip-top shape may have subtle signs of rust forming on its panels.
If a deal sounds too good to be true, it probably is.
1. While a contract is binding, the CPA provides protection for consumers in terms of section 55(2) of the CPA; "that each consumer has the right to receive goods of good quality, durable for a reasonable time and free from defects." The CPA offers a number of protections when buying a used vehicle and a number of cases have shown that dealerships have the obligation to inform the buyer. Be sure to read more about this before signing any contracts.