California has enacted a first-in-the-nation salvage title law that mandates all new and used car dealers slap a red sticker on any vehicle that has a salvage, junk, or flood title. The new law goes into effect July 1, 2012.
The new California salvage title law requires new and used car dealers to check a title through the National Motor Vehicle Title Information System (NMVTIS) that is maintained by the U.S. Department of Justice. All of the country's insurers, junk and salvage yards, and state motor vehicle departments are required to report updated title information every 30 days.
Vehicle History Mandatory
The strongest part of the new law is California new and used car dealers that sell used cars must acquire a NMVTIS vehicle history report that matches the used car's vehicle identification number (VIN). That means a dealer can't present you a CarFax or AutoCheck report as an alternative. It has to be from an official NMVTIS vendor.
Remember, it's important when you receive one of these reports to make sure it matches up with the vehicle you are buying. After all, two 2008 Ford Edges look alike - but one could have a salvage title and the other could be normal.
Let's reinforce that point. Match the salvage title report to your vehicle by reading the VIN, which can be found on the lower part of the windshield on the driver's side. Don't fall for a last-minute switch.
Also, keep in mind that this law does not apply to private sellers. You need to maintain your diligence when buying any vehicle from a private seller. Also, there are dealers that try to pass themselves off as private sellers. I have advice on how to spot dealers posing as private sellers.
Letter of the Law
The used vehicle with the salvage title has to have a specific sign posted on it. (For some reason it's black on red, which can difficult to read - should have been black on yellow but nobody asked me). Here is the language:
"WARNING According to a vehicle history report issued by the National Motor Vehicle Title Information System (NMVTIS), this vehicle has been reported as a total-loss vehicle by an insurance company, has been reported into NMVTIS by a junk or salvage reporting safety, and/or condition of the vehicle. Because of its history as a junk, salvage, or title-branded vehicle, the manufacturer's warranty or service contract on this vehicle may be affected. Ask the dealer to see a copy of the NMVTIS vehicle history report. You may independently obtain the report by checking NMVTIS online at www.vehiclehistory.gov."
As you may be aware, California is the country's largest market for cars. More than 800,000 used cars were sold at new car dealerships last year. That doesn't take into account the used cars sold through used car dealers or private sales. Overall, there are 30 million vehicles registered in California out of a population of 36 million.
The implementation of this new salvage law in California is important because it's a crime to willingly sell a used car under fraudulent grounds. It's tantamount to theft of a consumer's money. The U.S. Department of Justice says preventing salvage title fraud will save between $4.3 billion and $11.7 billion.
According to a legislative analysis of the new law, it was the intent of the California legislature to ensure that every motor vehicle dealer licensed in the state obtain a NMVTIS vehicle history report for every used vehicle that will be offered for retail sale and that any used vehicle that has been titled or reported as salvage or junk as indicated by the NMVTIS vehicle history report be identified as such. California is in full compliance with NMVTIS as are 87% of motor vehicle departments across the country.
There's one more thing to keep in mind. Not all salvage titled used cars are automatically a bad deal. Have an independent auto mechanic inspect the vehicle. It could end up being a good deal as it has been for some, especially if you are mechanically inclined.