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What do insurance companies do with totaled cars? – Insurance Employee Tips

What do insurance companies do with totaled cars? – Insurance Employee Tips

Auto insurance companies write off thousands of autos each year, but where do all those totaled vehicles go?

Auto insurance companies send their totaled vehicles to salvage auctions where licensed dealers place bids to buy the vehicle.  These totaled vehicles are then rebuilt or used for parts. If you want to keep your totaled car then it’s salvage value will be deducted from your total loss settlement. 

The most popular salvage auctions are CoPart, Insurance Auto Auctions, Mannheim Auctions and Adesa.  

Insurance companies recoup their claims losses through the sale of totaled vehicles at a salvage auction. It is in the insurance companies’ interest to maximize profit from auction sales.  To do this, insurance officials set minimum bids which are based on the year, make, model, and mileage of the vehicle.  

Cost of repair, damage severity, location, presence of airbag deployment, if the vehicle can start (and drive) are also taken into consideration to determine the minimum bid for each vehicle.

For example, a vehicle which sustained partial flood damage but otherwise has no collision damage, will yield a higher bid rather than the same vehicle that has suspension damage, deployed airbags, and dents on every panel.

Totaled Car at Salvage Auto Auction
Theft Recovered (Stripped Down) Vehicle Awaiting Auction

If a vehicle does not sell for a few auctions, insurance officials will lower the minimum bid to entice buyers because the insurance company is paying storage for every vehicle they have parked at the auction lot.

Not all vehicles at a salvage auction are totaled. Undamaged theft recoveries that were already paid out, rental cars, and lease vehicles also make their way onto the auction block.

If you are contemplating keeping your totaled vehicle and want to know the pros and cons, check out my article “Can I Keep My Total Loss After an Accident?“.

Who buys total loss vehicles from the salvage auction?

Total loss salvage vehicles are purchased at auctions by used car dealers, exporters, dismantlers and scrap companies.  

Used car dealers and body shops commonly repair and sell previously totaled vehicles. These vehicles’ titles must be branded salvage in the vast majority of cases.  Some unscrupulous dealers might even be able to maintain a clear salvage free history by washing the title through multiple states, which is why it is important to purchase a vehicle history report before you buy a used car.

Exporters are rebuilders from foreign countries that have a representative at US salvage auctions to bid on vehicles and ship them to another country.  These vehicles are then rebuilt or used for parts to rebuild other vehicles.

Dismantlers are recycling yards and parts suppliers which dismantle vehicles and sell automotive components individually or as assemblies.

Scrap companies buy vehicles for their metal value such as completely burned cars or those that any of the previous buyers don’t want since they are not rebuildable or worth parting out.