How to Buy Vehicles Directly From Insurance Companies [2024]

Auto insurance companies are, not too surprisingly, in the business of selling auto insurance policies. A customer in need of basic liability, collision, comprehensive, or uninsured motorist coverage usually requests quotes from the top insurance company serving his/her state.

When thinking about buying a car, turning to an insurance company is doubtfully the first step anyone takes. Insurance companies are not auto dealers. So, why bother contacting an insurance company to purchase a car?

The reason is insurance companies help facilitate the sale of certain vehicles. Specifically, insurance companies promote the sale of salvaged vehicles. Buying a salvaged car through an insurance company rarely involves any difficulties, either.

Learn more about how to buy a car from insurance companies.

What is a salvaged car?

A salvaged car reflects a vehicle the insurance company considers a total loss. That means the cost to repair the vehicle would be more than what the vehicle is worth.

A person who pays $15,000 for a car and drives the vehicle for 12 years, putting 170,000 miles on the model, cannot expect to be paid $15,000 if the vehicle is destroyed in a fire.

The resale value would be well below $15,000. The insurance company only reimburses the insured for the value of the car. That is the way insurance works. Cars with salvage titles are generally worth about 20%-40% of what a clean title car is worth, according to Kelley Blue Book.

Honestly, how could anyone acquire insurance levels on a car that exceeds the value of the car? No insurer could feasibly — or even legally — agree to such a deal.

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How does a vehicle become a total loss?

Examples of vehicles suffering a total loss include:

• A car totally smashed and crushed in a highway accident
• A car going over a bridge and into 12-feet of water
• A building collapsing on top of cars parked in a garage

In each instance of the above, the result would be a car so destroyed that the inoperable vehicle finds itself earmarked for a scrap yard.

With the proper insurance in place, the driver can file a claim and receive a total loss payment. Once this is done, the insurance company takes ownership of the car.

The former owner might be thrilled to see the useless metal taken off their hands. The vehicle then becomes the insurance company’s problem. However, some drivers may want to purchase their totaled car back, if the vehicle was totaled out due to an accident. Or they may not want to buy a new car off the expensive market, so they opt to stick with a salvage title because it’s cheaper.

If the driver doesn’t want the damaged goods back, the insurance company could very well sell the car to a junk yard and recoup a small amount of money back.

Can you buy a damaged car at an auction or scrapyard?

Imagine a high-mileage vehicle that runs very well due to the owner taking great care of it. Unfortunately, the vehicle’s high mileage and age are accompanied by several dents and scratches. The resale value of the vehicle might be in the neighbourhood of $1,800.

The car ends up severely damaged in an accident or another covered event. All four tires are ruined and the body is severely damaged. The repair work on the car would exceed $1,800 turning the vehicle into a total loss.

Upon taking ownership of the car, the insurance company often slates the model for auction. Sometimes, the whole auction process is skipped and a direct sale to a scrap yard commences.

Buyers would then be referred to the scrap yard. Haggling with the scrap yard representatives remains an option. Some may find bidding at auctions to be a potentially better strategy.

At an auction, the bidders may be in a position to restore the car. For example, someone who already has the necessary tires in good condition would simply need to replace them.

If the person is a mechanic, he/she can change the tires, in essence, for free. A mechanic capable of doing the body work can do so without labor costs.

Once restored, the vehicle may resell at a small, but decent, profit. There are scores of other tales in which a salvaged vehicle can be saved. The person capable of doing something with such a car does need to find a source.

Restoring the vehicle may not even be necessary. Someone with access to buyers could purchase a totaled car and resell the various parts. A brand new oil pan could cost someone $300. Access to a used one at $60 would be an awesome deal.

Also, if you don’t feel like venturing out to an auction, there are multiple online auction sites available. Keep in mind there are some risks involved with online car auctions, as you won’t be present to carefully investigate the vehicle yourself. Online auctions can sometimes take advantage of the fact that you’re not seeing the salvage vehicle in person, which means they could heavily downplay the amount of damage done to the cars for sale.

Can you buy auto insurance for a salvage car?

If you buy a salvage car from an insurance company, you can get auto insurance coverage, but it may not be as simple as insuring a new or slightly used car. Some insurance providers may be willing to sell you liability insurance, but not collision coverage or comprehensive coverage. (For more information, read our “Best Auto Insurance for Used Cars“).

Liability coverage pays for damage to other vehicles resulting from an accident you caused, and it’s required to drive legally in most states.

An auto insurance policy with liability, collision, and comprehensive insurance combined is called full-coverage insurance.

Just like you would with any other vehicle, you should shop around for quotes when looking for insurance for salvage title cars. You may be able to find an insurer that will provide the coverage you want with an affordable insurance rate, but it likely won’t be the first company you consider.

Before you buy a salvage car anywhere, search the vehicle identification number (VIN) to get more information.

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How can you get more information?

Auto insurance companies do not directly sell the vehicles they acquire to individual buyers after total loss settlements. Likely, the auto insurance company works with a salvage yard or auction dealer to sell the model.

Contact an insurance company to find out when and where the next local auction is taking place. Unfortunately, some auctions are only open to licensed car dealers, which means they’re not open to the general public.

You can also research various auction sites, and see if there are any that take place in person in your area. Finding an auction that you can attend in person can be helpful, since you’ll get to see the vehicle you’ll be bidding on in person. It’s tough to see frame damage from a computer screen.

What else do you need to know?

Purchasing a totaled vehicle at an auction is possible if you’re wanting to buy back your old, salvaged car, or if you can’t afford something off the new car market.

You will want to ensure that you’re dealing with reputable auction sites, and that the vehicle is being sold at an affordable rate.

Additionally, the buyer really has to know if they can restore or resell the vehicle at an acceptable profit level. Otherwise, the deal won’t be anything more than a time and money pit.

Just like comparison shopping for good insurance, detailed effort supports any attempt to buy a salvaged vehicle.

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