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
The insurance company isn’t in the business of rebuilding and selling cars, they’re in the business of collecting premiums and only occasionally paying out. They don’t want to take the risk on spending time and money on rebuilding it to sell it; it’s possible that the market crashes after they invest in the parts but before it’s fixed and able to be sold. Additionally, when selling a car, it’s always possible something is still wrong with, and even though used car sales in the US are as is, someone may still sue over that issue. Even if they win, it costs time and effort to fight. So basically, the insurance company sees a lot of risk for something that doesn’t align with their business model.
Now, why would they total a car that may still be fixable? The insurance company looks at other costs than just the cost of repair. If the repair will take 8 months due to supply chain issues (which absolutely are still happening), the insurance company may have to pay for a rental car for that time. That may end up costing a lot more than the repair cost, so it’s cheaper for the company to write a check for the value of the car and sell it as scrap.
Edited to add: I haven’t looked at a lot of salvaged cars, but I think you’re also vastly over estimating the amount a salvaged car will sell for. In fact, I’ve never seen one sold. All the salvage titles I’ve ever seen or talked about are from the original owner buying it off the insurance company (e.g., their 30k payout is reduced by the 1k the company would have sold it for) and then the owner rebuilds it because it has some sort of value outside of just being a car.
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