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To Salvage or Not to Salvage?

Many of you have received emails from Texas DMV noting that as of September 1, 2019 a dealer with a valid GDN can also operate as a salvage dealer.  This was the result of SB 604 during the 86th Texas Legislature.  While that sounds like welcome news, TIADA would advise you to proceed with caution as you can run into unforeseen penalties and complaints.
 
Whether part time or full time, salvage and rebuild dealers in Texas have a whole other set of laws and forms to deal with.  This includes additional rules that often are very different from your GDN laws, yet often carry the same harsh penalties.  Seemingly innocuous matters such as signage, form submission, and co-mingling inventory may prove problematic. Texas DMV is in the process of finalizing relevant salvage rules in the Texas Administrative Code.

 
Some dealers may consider entering the salvage / rebuilt marketplace as a method to increase their inventory. For the record, a rebuilt vehicle, means it was branded “salvage”, usually from an insurance settlement, but was later rebuilt to road worthiness. A rebuilt vehicle must pass safety anti-theft inspections, and other state-mandated standards in order to return to the road. In addition, rebuilt titles MUST have additional disclosures other than the “As-Is.”
 
“This motor vehicle has been repaired, rebuilt or,
reconstructed after formerly being titled as a
salvage motor vehicle.”
 
 Be careful selling rebuilt vehicles as the vehicle's VIN may appear in NMVITIS or other insurance databases and prohibit an insurance company from ever providing insurance on that vehicle…..which would conflict with your own retail installment contact. This could expose your dealership to regulatory complaints and perhaps even civil litigation.
 
Insurance?  Will my garage liability policy cover salvage and rebuilding operations?  According to Ann Mullen of Mullen Insurance, “Salvage/rebuild risks and exposures are vastly different for an auto sales and/or repair operations.”   “Most, if not all, admitted markets' underwriting guideline restrictions preclude writing salvage/rebuild dealers because of the liability exposure attendant to salvaged/rebuilt vehicles.   Be sure to contact your insurance agent to discuss your business going forward if you are planning on entering into salvage / rebuild operations.
 
What about VIT tax? A salvage vehicle does not need to be reported on a dealer's vehicle inventory tax declaration. The Texas Tax Code definition of “motor vehicle” says “The term does not include: (A) a vehicle with respect to which the certificate of title has been surrendered in exchange for a salvage certificate in the manner provided by law;…” Texas Tax Code Section 23.121(8)(A).
 
 
 

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