(iSeeCars) – Every new and used vehicle sold in the United States has a car title, which is an important document that proves legal ownership of a vehicle. Along with showing proof of ownership, a car title also lets you know if a vehicle is damaged or defective. There are two categories of titles: clean and branded. A clean title means that a vehicle has a clean record, while a branded title means that a vehicle has incurred serious damage and has been deemed a total loss from an insurance company.

Because titles follow the car, once a title is branded it’s final – there’s no way to legally make a branded title revert to a standard or clean title.

What is a branded title, and should you buy a branded title vehicle? There are multiple categories of branded titles, but the following list represents the five most common types of branded titles:

1. Salvage Title

Getting in a fender-bender is one thing, but being in a serious accident is something else entirely. The level of damage sustained by a vehicle in a serious crash is usually enough to deem it a total loss by the standard of most insurance companies; this is especially true if the airbags deploy.

So what happens when your car gets deemed a total loss? Your insurance company cuts you a check for the value of the car, the car gets towed to an impound lot owned by the insurance company, and then it’s sent to a salvage auction house specializing in cars that have met an untimely end. During this chain of events, the title reverts from a clean to a salvage title.

Here’s where it can get interesting. Once that car goes to the auction, it’s usually bought by the junkyard for cheap in order to be scrapped for parts. But sometimes, if the damage doesn’t look too serious, an enterprising auto shop might purchase the car for cheap, fix it up best they can, and try to resell it with a rebuilt title. A rebuilt car title is issued when a car originally deemed as salvage is repaired and passes a state inspection.

If the seller is honest, they’ll price the vehicle fairly and disclose what repairs were made. In this instance, you can purchase the car for well below fair market value. But is it worth the savings?

For most people, no. In most instances, if a car is hit badly enough to earn a salvage title, it might not drive like it did prior to the accident even after the repairs. There can also be questions about how extensive the damage really was and if the mechanics who revived the car were thorough in their repairs. And then there’s the issue of financing and insuring a salvage or rebuilt vehicle, which can be a difficult or even impossible task. Many lenders will not finance branded title vehicles, while only a few insurance providers will cover rebuilt title vehicles.

The takeaway from all this is that any car with a salvage title can present challenges. If you come across one, it’s likely best to walk away, regardless of the price. (For more information on Salvage Titles, refer to our handy guide.)

2. Lemon Title

We like to think car companies have honed their manufacturing processes to absolute precision. New cars are perfect, right? Well, not always. We’ve all heard of the phrase “buying a lemon,” which most commonly refers to the purchase of a defective vehicle. These problematic new cars are common enough that each state has enacted their own Lemon Law to protect consumers from purchasing one.

Essentially, the Lemon Law states that if a new car suffers problems severe enough that the manufacturer cannot repair it within a sufficient period of time, they are obligated to repurchase that car from the consumer. This ‘substantial defect,’ as the law phrases it, must occur within a defined period of time or number of miles and must not be caused by abuse. The definition of substantial defect varies by state, but it generally refers to issues that make the car unsafe to operate – things like faulty steering, brakes, engine, transmission, and other big-ticket items. 

If a car is deemed a lemon, the manufacturer has to try to fix it at least once, and have the effort fail. In most cases, multiple repair efforts are attempted (without success). When a car gets bought back due to the Lemon Law, the title will change to a lemon-branded title. Again, a car branded as such can be bought for cheap- but there’s a potential host of problems awaiting a car that the original manufacturer couldn’t fix after multiple attempts.

Because Lemon laws vary from state to state, check with your state about their particular laws.

3. Water Damage Title

The number-one enemy of electronics is water. Cars happen to have a lot of electronics buried in them. They also have engines and transmissions which, besides their largely computer-controlled sensors and valves, are also vulnerable to water damage.

Of course, cars are designed to get wet. But they’re not designed to get flooded. A car that is the victim of flooding has likely been submerged in multiple inches – maybe multiple feet – of water. Being inundated to that extent can wreak havoc on a car, causing anything from glitchy electronics to ruined engines, depending on how much water ended up in the car.

Cars deemed to have flood damage get bought back by the insurance company and are sent to the auction, where – usually – they end up meeting the crusher. But sometimes people try to fix and flip a flood car. Just like salvage vehicles, flood-titled cars are to be avoided.

4. Hail Damage Title

A car that’s been in a hail storm may be deemed a total loss by the insurance if bodywork and body panel repair costs exceed the car’s value.

A hail damage title is not a branding that is widespread across all the states, but those that do differentiate let buyers and rebuilders have a chance at a good deal. Hail damage is superficial, after all – if you can look past the acne-riddled hood, roof, and trunk, the car is completely usable.

If there’s one branded-title car that is worth considering, it’s the hail damage cars, because mechanically there shouldn’t be any significant damage stemming from the incident that prompted a branded title.

5. Odometer Discrepancy

Sometimes the mileage displayed on the car’s odometer isn’t representative of the true mileage on the car. This could be indicative of odometer fraud, but more commonly this occurs when the odometer is replaced with a new or used unit and the readout isn’t adjusted to match what the car actually has for mileage.

With a vehicle history report like Carfax or Autocheck, an odometer rollback warning might appear on a vehicle’s report. These warnings should be taken with a grain of salt – it’s very plausible that when the car went in for repair the technician or service advisor accidentally entered the wrong mileage, which was then picked up by the report. It’s worth doing due diligence to investigate and see if this is the case.

As for actual odometer tampering, that’s a tough feat to do these days due to the complexity of the digital odometers found in today’s cars. The most likely cause for an odometer rollback title is the replacement odometer, but as always, do your homework and try to figure out what the story is behind the vehicle’s branded title.

Title Washing

Because title brands are so repulsive to shoppers – essentially making a branded car just about impossible to sell – some unscrupulous sellers resort to a scam called title washing. The goal is to try and fraudulently eliminate the brand and make the car appear to have a clean title. 

A common way to go about this is by taking advantage of the varying titling rules across the different states. Some are stricter and some are more lenient when it comes to titling vehicles, and not all recognize the same brands. If you take a car with a title brand from a stricter state to a more lenient one, it’s possible to have a new title issued that makes no mention of the brand. It then would appear to shoppers as a clean-titled car. 

Another method is actual tampering of the physical title document. It’s why it is always a good idea to take a look at the title in person, rather than just take the seller’s word the title is clean. Seeing the title also proves the seller has the title to begin with. No title at all can also prove to be a serious roadblock in many states when it comes time to register the car with the Department of Motor Vehicles (DMV).

The best way to avoid a title washing scam is to get a vehicle history report. These reports disclose past history of a car regardless of the current title status. If a car that was once branded now sports a clean title, the reports will disclose this. The cost of an Autocheck or Carfax report is well worth the peace of mind that comes with a complete vehicle history. 

How to Know If a Car Has a Branded Title

Before purchasing a used car, it’s important to get a vehicle history report such as Carfax or Autocheck and to run a VIN check. The iSeeCars free VIN Check decodes a car’s vehicle identification number (VIN) and provides a comprehensive analysis that includes up to 200 data points to help answer all the questions shoppers should have before buying a used vehicle.  

The VIN Check provides title information when provided by the state DMV. It will let you know if the vehicle has a clean title or if it has a branded title. The comprehensive report will link to vehicle history reports from CarFax and AutoCheck, and in many cases they will be free. The vehicle history report will provide detailed information about the vehicle’s title. For example, if a salvage certificate was issued after an accident, the vehicle history report will provide details about the accident and where the vehicle sustained damage.

Should You Buy a Car With a Branded Title? 

There are many risks to buying a branded title car.  Here’s what you should look out for. 

  • Safety Risks: The main downside to buying a branded title car is the inherent safety risk. Because these cars have incurred significant damage, there’s a chance that they haven’t properly been repaired. Even if the car has been completely rebuilt and passed a safety inspection, it may not have been repaired well. There are safety hazards that an inspection cannot detect such as if the airbags will deploy if an accident occurs.
  • Risk of Fraud: Sellers of branded title cars will likely claim that the damage was minor to help the car sell. Branded title cars are as-is sales, which means that they aren’t covered by warranty protection.
  • Difficult to Insure and Finance: Some insurance companies will not provide coverage for branded title vehicles, while other insurers will only provide limited coverage at a high cost. Banks and lenders also won’t provide loans for vehicles without a clean title.
  • Low Resale Value: When it comes time for you to sell or trade-in the vehicle, it will have a low resale value. Some dealerships don’t buy branded cars, which is something to keep in mind for when you want to sell it.

In some specific circumstances, there can be benefits for car buyers when purchasing a branded vehicle. 

  • Savings: You might come across a vehicle that has only had cosmetic damage such as from a hail storm. As a result, it will be priced below market value.
  • If You’re a Mechanic: If you have the ability to fix a car, then buying a salvage car doesn’t carry the same risks. You could either use the parts to repair other cars or restore the vehicle so it’s roadworthy again.

The Bottom Line

If you’re shopping for a used car whether at the dealership or from a private seller, you want to buy the nicest example you can find. A title brand is a black mark on any car, indicating that the car in question has been through some sort of major, condition-altering event. It’s always better to buy a car with a clean title if you can, regardless of the cost savings. 

To make sure the car you want has a clean title, always be sure to get a vehicle history report and also ask to see the vehicle’s title. If the seller agrees, you’ll know that not only does the car have a clean title, but also that it has a title to begin with. If the seller lost the title or otherwise doesn’t have it, the process of registering the car can be complicated for both buyers and sellers. 

With 40 million used cars bought and sold each year, there’s no reason to settle for a branded vehicle. If you come across any branded title vehicles, keep looking – the right car with a clean title is out there.

More from iSeeCars:

If you’re ready to take to the web for your own car buying process, you can search over 4 million new and used cars with iSeeCars’ award-winning car search engine that helps shoppers find the best car deals by providing key insights and valuable resources, like the iSeeCars VIN check report and Best Cars rankings. You can also filter by title, ensuring the cars you find have a clean title.

This article, What is a Branded Title?, originally appeared on iSeeCars.com.