Salvage titles exist because it is obviously profitable for someone to buy totaled cars and rebuild them. But this even existing would imply that in some cases, an insurance company paid out more than the actual cost to repair the vehicle, because otherwise it couldn’t possibly be profitable.
For example, let’s say a car has a value of $30k and gets totaled. The insurance pays the owner $30k and sells the wrecked car to a rebuilder for $1k, so they are out $29k. If the rebuilder then spends $15k repairing the car and sells it for $20k due to its reduced value, they will make a $4k profit.
Thus, why wouldn’t it be better for the insurance company to just spend the $15k themselves to repair the car, write the owner a check for $10k for diminished value, and pocket the $4k while also avoiding whatever overhead it takes to do the transaction to sell the wreck? In addition, one would imagine that insurance companies could achieve much better scale and/or vertical integration by moving this operation in-house vs. small rebuilders.
In: Economics
Your truck gets tboned and the insurance company totals it. The doors won’t open, the cab is not usable on one side, the engine has damage as does the bed. Your insurance company sees this and realizes that in labor alone you’ll pay more than what’s it’s worth. Joe comes along and buys the salvage title for a few hundred, you’ve already gotten your money, the insurance company is recouping a small amount of that by selling the title. Joes spends a couple weeks fixing everything to the best of his ability, he’s a mechanic or hobbyist who has the tools and knowledge. The truck now runs, but it’s ugly, loud, maybe has a few issues here or there that aren’t a big deal but make it less valuable (window won’t roll down, side mirror doesn’t adjust using the button anymore, bed lining is a little beat up/missing). Joe knows that this truck he bought for a few hundred bucks is now driveable and worth maybe a thousand(hell in today’s market maybe two thousand). So for a couple weeks of his extra time(that he will likely spend working on a car anyway) he’s made a few hundred bucks. Possibly even more than that. It’s not a full time job but as far as hobbies go it beats dumping thousands into something with no return. My grandfather used to do exactly this and always said “I couldn’t feed my family with it, but it made my mortgage hurt less.”
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