So, you bought a car that was in a serious prior accident that was not disclosed to you? This scenario is increasingly common. Often a vehicle’s prior history as a wrecked car is hidden from potential buyers. Even if a car seems to run well and looks aesthetically nice, the car’s history of serious damage means that its true market value is dramatically decreased.
The number of vehicles deemed a “total loss” by insurance companies has been rapidly increasing. Believe it or not, the average age of a car on the road in the United States is almost twelve years old. A “total loss” vehicle is simply a car that would cost more to repair properly than it is worth. How then can rebuilders be part of a thriving industry that buys these salvage vehicles, rebuilds them, and resells them at a profit?
The answer is that the repairs on the cars are often shoddy, ignoring the complicated measures necessary to insure that today’s sophisticated cars meet their designed safety standards. Rebuilders of salvaged cars are largely unregulated, located in backyard shops across the nation, and often fail to provide the most basic labeling requirements for these remanufactured goods.
A number of parties have a financial incentive to hide a car’s salvage history—in fact every seller of a salvaged vehicle will have a financial incentive to cover up the existence of its salvage history. This financial incentive extends not just to hiding the history of the car from the ultimate consumer buyer, but covering up the tracks of that history so that if the consumer does discover the fraud, the dealer selling the vehicle to the consumer has at least a plausible defense that it did not know of the salvage history either. For example, a dealer will pay a wholesaler more for a wrecked car if the title has no salvage brand and the name of the insurance company does not appear anywhere on the title, even if the dealer could easily wash that information from the title before the ultimate consumer purchaser sees the title.
The Way a salvage title scam works . . .
“The easiest way to ensure that the insurer’s name is not in the chain of title is for the insurer (illegally) to obtain the policy holder’s signature on the title transfer document without listing the name of the transferee (that is, the insurance company). Then when the insurance company resells the car to a rebuilder or to another consumer, the rebuilder or consumer’s name is listed as the transferee, making it appear that the transfer was made directly from the policy holder to the new owner.”
In most salvage cases, after a wreck, the owner will turn over title to an insurance company, and it is thus the insurance company who will re-introduce the salvage car into commerce and will be responsible initially for disclosing its history. The very name of an insurance company on the title history is a good indication of salvage history, so an incentive exists not only to keep the salvage brand off the title but to keep the insurer’s name out of the chain of title as well.
The easiest way to ensure that the insurer’s name is not in the chain of title is for the insurer (illegally) to obtain the policy holder’s signature on the title transfer document without listing the name of the transferee (that is, the insurance company). Then when the insurance company resells the car to a rebuilder or to another consumer, the rebuilder or consumer’s name is listed as the transferee, making it appear that the transfer was made directly from the policy holder to the new owner.
State law may require that the insurance company obtain a salvage title or that a salvage brand be placed on the vehicle’s title when the company acquires the wrecked car from the consumer. An important part of any salvage fraud scheme is obtaining a new vehicle title clean of any indication of the salvage brand, either because the insurance company never complied with the salvage brand requirement or because that brand was subsequently washed from the title.
One of the best tools available to consumers to avoid purchasing such vehicles is the National Motor Vehicle Title and Information System, the most complete existing database of salvage and total-loss vehicles.
If you suspect that you have purchased is a “total loss” vehicle, give us a call today. In follow up posts, we will look at the laws in both Kansas and Missouri regarding failure to disclose salvage vehicles.