A salvage auto auction is where insurance companies sell totaled vehicles that have been given a salvage title, according to Fox Business. If a car is damaged and the total cost of the repairs is more than the vehicle is worth, the insurance company considers it a total loss.
In many cases, the total cost of the repairs needs to equate to between 51 and 80 percent of the vehicle's total value for the insurance company to consider it totaled, according to Fox. When the insurance company considers a vehicle a total loss, the state vehicle titling agency then issues a salvage title to the car, which states that it cannot be driven, sold or registered without the necessary repairs and inspections, according to Edmunds.
When they decide a car is a total loss, the insurance company takes possession of the vehicle, which they then sell through a salvage auction. In most cases, the vehicles are either sold to salvage yards or people who specialize in repairing salvage vehicles, states Fox. Individual consumers may also buy vehicles at salvage auctions, but most of these auctions require a person to possess a salvage buyer's license in order to place bids, according to CarsDirect.