In Arizona, when a damaged vehicle continues to be owned by the owner even after being declared a total loss by the insurance company, it is called owner-retained salvage.
In this process, the owner retains ownership of the vehicle post-accident or theft and receives an insurance payout after the vehicle is declared a total loss. However, the process of retaining a damaged vehicle has considerable ramifications in the aspect of valuation and title details of the vehicle.
Salvage retention in Arizona refers to the ability of a car owner to take possession of a vehicle after an insurance company has considered it a total loss. However, the owner receives a lower settlement amount for his vehicle because of its salvage value. The owner must also follow the state’s regulations concerning salvage title, inspection, registration, and disclosure.
The Total-Loss Determination
A salvage vehicle refers to a vehicle other than a non-repairable vehicle that has met with a high degree of damage or loss due to theft, wreckage, flooding, or any incident that makes repair uneconomical. In Arizona, there is no strict percentage of the value of the insured vehicle to qualify for being termed as salvage since the definition of salvage is not rigid but rather based on the criterion of the economic feasibility of repair.
Once the vehicle is deemed a total loss, the insurance company will make a cash settlement for the vehicle taking its actual cash value, or ACV, immediately before the damage into account. The valuation of the vehicle is based also on market performance of the vehicle just before acquiring damages. And when the owner makes a first-party claim based on his own insurance policy, the deductible is considered before calculating the amount of settlement. According to Arizona insurance regulations, the settlement for first-party total-loss claims can be in the form of a replacement vehicle or cash amount, which should depend on how much the vehicle costs and covers for taxes as well as transfer fees.
How the Salvage Deduction Works
When a car insurance company obtains the vehicle, it retains the salvage value from the destroyed vehicle through resale or recycling. In case the insured keeps the car, the insurance company cannot get it. Therefore, the amount of total loss settlement will be calculated as the total loss payment given by the insurance company to the insured minus the salvage value of the car and insurance company deductible amount.
For example, let’s assume that the actual cash value (ACV) of the car is $18,000, the deductible is $1,000, and the salvage value is $4,000. In case the car insurance pays for the vehicle, the insured gets the amount of $17,000. If the insured keeps the vehicle, he/she gets $13,000.
When a person plans to retain the salvage vehicle, he/she is supposed to make a request for a valuation report including the salvage value deduction and its calculation.
The Title and Registration Consequences
The act of retaining title does not permit the owner to use the vehicle any longer under the ordinary title of the vehicle. The law of the state of Arizona states that whenever an owner retains a vehicle which is in the condition of salvage or nonrepairable he/she has to abide by the salvage title requirements prior to being able to receive total loss settlement or dispose of the vehicle. The owner will have to obtain the necessary salvage or nonrepairable title from Motor Vehicle Division of Arizona Department of Transportation.
A vehicle which is under the salvage title cannot be registered like ordinary vehicles and cannot be used for driving on public highways. The Arizona Department of Transportation states that such vehicles could be moved with the help of a qualifying temporary three-day permit but in order to be used for driving the vehicle needs repairs and inspection, registering and getting insurance.
A vehicle designated as nonrepairable is entirely different from the first one. This vehicle can be used only for scrap or spare parts and cannot become a roadworthy vehicle due to cancellation of its registration. The owners should check what type of the title they receive before accepting settlement.
Returning the Vehicle to the Road
The method of returning the vehicle to usage again involves repairing the vehicle, filling in application for title and registration, providing the salvage title to the MVD and obtaining emissions compliance test if necessary. It was stated by the Arizona Department of Transportation that the level of inspection conducted for such purposes is Level III and it may demand a $50 inspection fee and a $4 title fee.
In case your vehicle is declared salvage and you want to keep it you have to keep all the receipts and invoices for the parts used for repair. MVD is entitled to verify ownership of major parts of the vehicle during the inspection.
Owner retention can be financially advantageous for someone who has experience in repairing vehicles or for someone who possesses a vehicle with parts valuable for repairing. The repair and inspection costs, resale value of the vehicle and all available options concerning financing and insurance should be taken into consideration prior to making the settlement.
A restored-salvage brand stays part of the vehicle’s history, and Arizona requires written or electronic disclosure of that status when the car is later sold.
