totaled car
ftwitty/Getty Images

If you’ve been browsing the used-car market, then you’ve probably stumbled upon vehicles with a salvage title or rebuilt title. While a salvaged or rebuilt car can be a cost-effective investment for the right person, it’s important to be aware of the ins-and-outs of such a scenario before making a purchase. Read on to discover if it’s worth your time and money to own a vehicle with a salvage or rebuilt title.

What does it mean to have a salvage title or a rebuilt title?

Though the specific details can vary from state to state, a salvage title is designated when the cost of needed repairs for a car outweighs the value of the vehicle. It usually indicates that the vehicle was written off as a total loss by the insurance company. There are a number of situations where a vehicle could be given a salvage title, including due to damage sustained from a car accident or extreme weather, or even after recovering a stolen vehicle. Vehicles given a salvage title are generally not allowed to be operated on public highways due to the danger they could pose to both drivers and bystanders.

A rebuilt title is typically designated after a salvage vehicle has been repaired or reconstructed. This allows the buyer to see that the car was previously deemed as unsafe or a total loss. In many states in the U.S., rebuilt salvage vehicles must pass rigorous safety and mechanical tests before being given the updated rebuilt title designation. However, in other states, there may not even be a requirement to inform the buyer of the vehicle’s title history.

How does a car get a salvage or rebuilt title?

If a vehicle incurs extensive damage with repairs totaling between 70-90% of the car’s value, then the insurance company will deem the car as a total loss. Once that determination has been made by the auto insurer, a state motor vehicle agency typically 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 motor vehicle agency. By giving the repaired vehicle a rebuilt title, this tells the buyer more about the car’s history.

Getting insurance with a salvage or rebuilt title

Salvage title insurance is not available but rebuilt title insurance is possible to obtain under certain circumstances. Since a car with a salvage title is deemed a total loss, it is not safe or legal to drive the vehicle on public roads and cannot be insured.

After the necessary repairs are made and upon being updated to a rebuilt title status, some insurers will offer liability coverage. However, most insurance carriers will not extend full coverage for salvage rebuilt cars because it’s challenging to assess all of the pre-existing damage the vehicle has incurred. Collision and comprehensive coverage are unlikely to be offered with this type of title.

Since a rebuilt title signifies that the vehicle is no longer in its pristine, undamaged state, you can expect a lower insurance payout in the event of an accident or incident. Furthermore, because there may be undisclosed or unseen damage in a rebuilt vehicle, insurance companies will also view this type of title as being more likely to pose a risk on the road.

What are some advantages and disadvantages of having a salvage or rebuilt title?

Purchasing a previously-damaged car can be a risky move, but if you know what you’re doing, it could also be a smart move. One advantage of cars with a salvage or rebuilt title is that they generally cost much less than vehicles with clean titles. In fact, salvage or rebuilt vehicles generally cost 20-40% less than the same type of vehicle with a clean title, according to Kelley Blue Book.

On the other hand, purchasing a car with a rebuilt title can lead to more costs in the long-term if the repairs made were not up to par. When you purchase a salvage rebuilt vehicle, you’re accepting that extensive damage has occurred to the vehicle. In some cases, there may still be undisclosed or unseen damages that could arise again.

Likewise, even if the vehicle has been fully repaired, you may have trouble finding insurance for the car. In many cases, those carriers who do insure cars with a rebuilt title will charge the same premium as a similar car with a clean title, even if your vehicle is worth much less.

Frequently asked questions

What is a rebuilt title?

A rebuilt title is designated to a vehicle that has previously held a salvage title and has been repaired or reconstructed to a safe, operational state.

What is a salvage title?

A salvage title is a designation given to vehicles that have received extensive damage that amounts to between 70 and 90% of the vehicle’s total value. This type of title vehicle is unsafe to operate and cannot be driven on public streets.

Can you insure a car with a rebuilt title? Can you insure a car with a salvage title?

Although not all insurance carriers will extend coverage in this scenario, a rebuilt title vehicle can typically be covered by an insurance provider after undergoing safety tests. However, the rebuilt vehicle will most likely not qualify for comprehensive or collision insurance coverage.

Salvage title insurance is not an option, as this title signals that the car has been deemed a total loss and too dangerous to be operated in public areas.

How does a salvage title affect my car’s value?

According to Kelley Blue Book, a salvage or rebuilt title can have a lasting negative impact on the value of a car. A rebuilt title can cause a drop of between 20-40% in value for your vehicle when compared to the same type of car with a clean title.

How can you tell if a car is a salvage vehicle that hasn’t been rebuilt properly?

According to Consumer Reports, if you see any of the following signs, the rebuilt title car may still be a lemon: paint that easily chips or doesn’t blend well with the rest of the vehicle, misaligned fenders, doors that don’t close properly, inconsistent welds, air freshener cover-ups to mask the smell of mold and much more. There are many telltale signs that the vehicle is beyond repair if you take the time to look closely.

Should you avoid purchasing a vehicle with a rebuilt title?

Typically, yes, because of the potential pitfalls that accompany buying a salvage or rebuilt title vehicle.

If you’re looking for a vehicle that is sure to be dependable without incurring additional repairs at a later date, you may want to skip over a salvage or rebuilt title offer.

On the other hand, if you’re interested in purchasing a car at a lower cost and putting the time and energy into getting the necessary repairs, this type of vehicle could be a cost-effective investment. If you’re the type of person who enjoys working on cars, a car with a salvage or rebuilt title may be a good project.