When shopping for a used vehicle, you might come across one with a rebuilt or salvage title. While these vehicles can be a good fit for the right buyer, it’s important to understand all aspects of them before deciding to buy or pass.
What does it mean to have a salvage title or a rebuilt title?
To help you have a better understanding of which each title means, here’s a closer look at both:
What is a salvage title?
A salvage title is designated for when the vehicle’s repair costs outweigh its market value, and the vehicle is considered totaled. This normally happens when an insurance company wrote off the vehicle. Some of the most common reasons why a car might have a salvage title are accidents, weather (especially flood) or the car was stolen. Vehicles given a salvage title may not be safe to drive due to the danger posed because of its damage.
What is a rebuilt title?
When a car with a salvage title has been repaired, it can receive a rebuilt title. This notifies the buyer of the previous history of the vehicle. To receive a rebuilt title, it must undergo a series of tests to ensure it’s safe to drive in some states. However, in other states, there might not be a requirement to inform prospective buyers of the vehicle’s 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, 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 motor vehicle agency. By giving the repaired vehicle a rebuilt title, this tells the buyer more about the car’s history.
How does a rebuilt title affect the value of a car?
A vehicle having a rebuilt title will likely have a lower value because it underwent significant damage. Compared to similar models with clean titles, a car with a rebuilt title could have 20 to 40% less value, amounting to potentially thousands of dollars.
Should you buy a car with a rebuilt title?
This depends on your situation. On the one hand, it could be a good deal. In some states, vehicles must pass rigorous inspections to receive a rebuilt title. And because the vehicle had a salvage title at one point, the resale value could be much less. This means you could save significantly.
That said, there could be some drawbacks. Just because it passed state inspection doesn’t mean the car is guaranteed to be safe for the long haul. Additionally, it could be difficult to insure your vehicle. And circling back to value, while you might get a deal to buy it, if you plan to sell it at some point, you won’t get nearly as much as you would with a car with a clean title.
Getting insurance with a salvage or rebuilt title
Salvage title insurance may be hard to find since the vehicle, in many cases, isn’t safe to drive. However, rebuilt title insurance is easier to obtain, but certain stipulations will still apply.
Even after the necessary repairs are made, some insurers will only offer liability coverage. 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.
If an insurer does offer collision and comprehensive coverage, you can expect a lower insurance payout from an accident or incident. Since a rebuilt title signifies that the vehicle is no longer in its pristine, undamaged state, its value is much lower. 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’s required to have my car earn a rebuilt title?
Each state has its processes in place, with some being more stringent than others. The best approach is to contact your state’s Bureau of Motor Vehicles to learn the process of obtaining a rebuilt title.
Is a salvage titled vehicle right for me?
If you’re an experienced mechanic or know one who can do great work inexpensively, then a salvage titled vehicle could be a great buy.
What should I look for when buying a vehicle with a rebuilt title?
First, check the vehicle’s history to determine what caused the salvage title status. In some states like Ohio, something innocuous as an abandoned vehicle could earn the salvage title distinction.
Next, see if you can determine who did the repair work. Research them online, noting Google reviews, their Better Business Bureau grade and your state’s Attorney General’s office to see if they do quality work. Doing these things will help you gain a better grasp of what you’re dealing with for that vehicle.