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If a car is declared a total loss by an insurance company, that doesn’t mean it’s automatically destined for the scrapyard. If someone buys the car from the insurance company and sufficiently repairs it, it may qualify for a salvage or rebuilt vehicle title. If you’re buying a car with a salvage title, you can often get a good deal, but it’s important to understand the implications of salvage or rebuilt titles before proceeding with the purchase.
Salvage title vs rebuilt title: what is the difference?
Salvage title and rebuilt title are both terms used to describe cars that have been declared totaled by an insurance company. The key difference is what has happened to the vehicle since. Cars get a salvage title when an insurer deems them a total loss and a rebuilt title after they are repaired to a driveable state.
What is a salvage title?
When an insurer determines that a vehicle’s repair costs outweigh its market value, the vehicle is deemed totaled. At that point, the title of the vehicle will be designated a salvage title.
Some of the most common reasons why a car might have a salvage title are accidents, weather (especially flood damage) or theft. Vehicles given a salvage title may not be safe to drive due to their extensive damage.
People may want to buy cars with salvage titles for many reasons. Some may plan to use their functional parts to repair other vehicles; others may attempt to repair the car to a driveable state.
What is a rebuilt title?
When a salvage car is repaired, it can get a rebuilt title, meaning that it is now safe and legal to drive on the road. This notifies the buyer of the previous history of the vehicle. In some states, to receive a rebuilt title, the vehicle must pass a series of tests to ensure it is safe to drive.
How does a car get a salvage or rebuilt title?
If a vehicle incurs extensive damage with repairs totaling between 70 percent to 90 percent of the car’s value, then the insurance company may deem the car a total loss. Once that determination has been made, a state motor vehicle agency changes the car’s title from clean to either salvage or junk. After being presented with a salvage title, you cannot drive, sell or register the vehicle until it has been repaired.
At this point, the salvage vehicle is typically sold by the insurer to a third party interested in repairing the vehicle or breaking it down for parts. If the vehicle is repaired, it will need to pass safety requirements before being given a rebuilt title by the state’s motor vehicle agency. By giving the repaired vehicle a rebuilt title, this provides the buyer more information about its history.
How does a rebuilt title affect the value of a car?
A rebuilt title will tend to decrease the value of a vehicle by a fair amount. The price drop usually ranges from 20 percent to 40 percent. After incurring such significant damage, even with effective repairs and a careful eye, it may not be possible to fully restore a totaled vehicle to its original condition. Buyers should be wary of lingering issues that may appear down the road.
Keep in mind that the 20 percent to 40 percent value reduction is a loose rule. Every car is different, and the type of damage a vehicle endures could play a big role in how much its value is impacted. The value of a salvage or rebuilt title car should be assessed on a case-by-case basis.
Should you buy a car with a rebuilt title?
Whether you should buy a car with a rebuilt title depends on your situation and needs.
One of the first things to consider is where you live. If you live in a state where vehicles must pass rigorous inspections to receive a rebuilt title, that helps reduce your risk by a fair amount. If you’re handy and confident you can handle issues that might pop up down the road, and you want to get a vehicle for the cheapest price possible, a rebuilt title might be the way to go.
That said, there could be some drawbacks. Just because it passed state inspection does not mean the car is guaranteed to be safe or functional for the long haul. Additionally, it could be difficult to get insurance coverage for your vehicle. And circling back to value, while you might get a good deal to buy it, if you plan to sell it at some point, you probably will not get nearly as much as you would if you were selling a vehicle with a clean title — if you can find a buyer at all.
If you are considering purchasing a salvage title vehicle, you may want to consider the following:
- How the vehicle was damaged
- The extent of the damage
- The vehicle repair process
- Whether a professional or certified mechanic examined the vehicle
- Whether your insurance company will cover a vehicle with a rebuilt title
It is important to do your research and thoroughly examine the vehicle before settling on it. Pay careful attention to the car’s frame and alignment. Lastly, it is important to get a professional mechanic to check the engine and other components.
Getting insurance with a salvage or rebuilt title
Salvage title insurance could be hard to find. Insurers that are willing to cover these types of vehicles may have certain stipulations.
Even after the necessary repairs are made, many insurers may only offer liability coverage. Some car insurance companies will not offer full coverage for salvage or rebuilt vehicles because it is challenging to assess the value of the vehicle. Furthermore, because there may be undisclosed or unseen damage in a rebuilt vehicle, insurance companies might also view this type of vehicle as more risky.
The best way to find insurance for a salvage title is to consult a licensed agent. Once you find a willing company, you may be required to provide a statement from a professional mechanic indicating that your vehicle is in good working condition. You may also need pictures that show its present condition and repair receipts.
What are some advantages and disadvantages of having a salvage or rebuilt title?
There are both pros and cons to consider when buying a car with a salvage or rebuilt title.
If you know what you’re doing and are good with cars, you could save a good amount by buying a car with a rebuilt title. Getting a 20 percent to 40 percent discount on your next vehicle could save you thousands of dollars.
However, unless you can handle basic repairs yourself, purchasing a car with a rebuilt title can lead to more costs in the long term if the repairs previously made are not up to par. When you purchase a salvage rebuilt vehicle, you are accepting that extensive damage has occurred to the vehicle. In some cases, there may still be undisclosed or unseen damage that could arise at a later date.
Likewise, even if the vehicle has been fully repaired, you may have trouble finding insurance coverage for the car. In many cases, the carriers that insure vehicles with a rebuilt title may charge the same premium as a similar vehicle with a clean title, even if your vehicle is worth much less.
If you’re just looking for an easy-to-drive car that can get you from point A to point B without much hassle, you should probably avoid cars with rebuilt titles. If you don’t mind tinkering with your car and handling some repairs, a salvage or rebuilt title vehicle could be a good fit.
Frequently asked questions
Each state has its own regulations, with some being more stringent than others. The best approach is to contact your state’s motor vehicle department to learn the process of obtaining a rebuilt title. In general, though, you may be required to have the following in order for the vehicle’s title to be changed to “rebuilt” after repairs:
- A salvage certificate from your vehicle’s insurance company
- An inspection by an authorized third party
- An inspection from certain state or county departments
- A statement of the repairs, signed by an authorized third party
- Proof of ownership
These requirements vary by state, though, so it’s important to do your research about the state-specific requirements you must meet in order to get a rebuilt title for your vehicle.
If you’re willing to put in the time to find a worthwhile vehicle with a salvage title, the vehicle you get in return may be worth the effort. Salvage titles are rarely given to “junkers,” so if you are an experienced mechanic or know one who can do great work inexpensively, then a salvage-titled vehicle could be a great buy.
First, check the vehicle’s history through Carfax or a similar service to determine what caused the salvage title status. In a few states like Ohio, something as innocuous as an abandoned vehicle could earn the salvage title distinction. Next, see if you can determine who did the repair work and the quality of their work. Research them online, noting Google consumer reviews, their Better Business Bureau report and any complaints filed with your state’s office of consumer affairs to see if they are well-rated and reputable. Taking these steps will help make the process smoother if you are interested in purchasing a vehicle with a rebuilt title.
Insurers base their decisions on risk. When they offer an insurance policy, they’re effectively placing a bet that you’ll pay more for the coverage than they’ll have to pay for claims.
Cars with rebuilt titles are far less predictable than a new or used car that hasn’t been totaled previously. It can be much more difficult or even impossible for an insurer to effectively predict the issues that could appear in the future and their related costs. That’s why, for rebuilt or salvage titles, insurers will typically only offer liability coverage, which protects you from liability in accidents that you cause and won’t provide coverage for future damage or problems related to the car.