What Is a Rebuilt Title?

Rebuilt Title vs. Salvage Title: What's the Difference?

The terms "rebuilt title" and "salvage title" both describe cars that have been declared a total loss by their insurer. Adding to the confusion, some states call rebuilt titles "rebuilt salvage." While these terms sound similar, they are not the same thing. Here's the primary distinction:

• Salvage title: A car receives a salvage title when an insurance company determines its repair costs are greater than its market value. Depending on the state or insurer, the determination may be made if costs exceed a set percentage of the car's value, such as 75%. Because of the extensive damage, the car may be unsafe and illegal to drive on public roads.
• Rebuilt title: A rebuilt title is issued after a salvaged car has been repaired and passes a safety inspection. A car with a rebuilt title can be registered and is legal to drive again.

As the following table illustrates, cars with a "clouded title"—such as salvage or rebuilt vehicles—presents some challenges. However, a rebuilt-title vehicle may offer more options.

Can You Insure a Rebuilt Title Car?

While you generally can't insure a vehicle with a salvage title, it is possible to insure a rebuilt title car. However, your options may be limited.

Most insurance companies offer liability insurance for cars with rebuilt titles, which covers damage you cause to others or their property in an accident. But many providers don't offer comprehensive and collision coverage, which pays for damage to your own car if it's damaged. That's because insurers may be wary of hidden damage and structural issues that could present problems down the road. In that case, distinguishing between pre-existing and new damage could make it hard to accurately value a claim.

If you do find an insurer willing to cover a car with a rebuilt title, expect them to charge up to 20% more to compensate for the added risk. Getting written documentation from the mechanic who restored the vehicle could help to secure insurance.

Is Buying a Car With a Rebuilt Title Worth It?

Purchasing a car with a rebuilt title comes with risks that must be carefully considered, such as:

• Lingering safety issues: If the repair shop missed any issues or cut corners when restoring the vehicle, your safety could be compromised. For example, if the car's wheels are misaligned, it could be difficult to steer at high speeds, increasing your chances of an accident.
• Low resale value: While you can save up to 40% buying a rebuilt-title car, that lower value also applies when you sell, and it'll be harder to find a buyer than with a clean title. And don't forget, many dealerships won't accept it for trade-in.
• Hidden problems: Even with a rebuilt title, the car could have underlying issues that take months or even years to manifest. A flood-damaged vehicle, for example, may be restored and appear fine now, but lingering moisture can erode the engine and wiring over time and lead to failure.
• Difficulty financing: Many banks and finance companies consider rebuilt-title vehicles too risky to finance. And those that do offer financing typically charge hefty interest rates.

What to Do Before Buying a Rebuilt Title Car

Despite the challenges rebuilt-title cars pose, buying one can still help you save money compared to a clean-title car. However, you should take specific actions before making that leap to help mitigate the risks.

• Get a thorough inspection. Even if a seller is transparent and tells you how the car was damaged and who repaired it, it's still a good idea to have a reputable mechanic put the car through its paces and assess its safety and reliability.
• Check the vehicle's history. While you're at it, get a vehicle history report to discover information you can use to decide whether it's worth purchasing and at what price. The report may shed light on problems that could cost you later—from past accidents and flood or fire damage to mileage discrepancies and title issues.
• Save money or explore financing. If you can afford it, paying in cash may be your best option since financing can be hard to come by and often comes with steep interest rates. You might also use a personal loan to buy the car, which doesn't require you to use the vehicle as collateral.
• Compare your insurance options. Policies regarding rebuilt title cars vary from one insurer to another, so it's wise to research and get quotes from several providers beforehand. Experian's free car insurance comparison tool can streamline the process by helping you shop and compare quotes from top insurers.
• Look out for title washing. If the history report shows a recent title from another state, it could be a sign of title washing. This is a common used car scam where shady sellers register a car in another state with more relaxed standards for rebuilt titles.

Look Up a Car's History Before You Buy

Buying a car with a rebuilt title could help you save a tidy sum, especially if your mechanic deems it safe for the road. Still, hidden damage could surface later, so it pays to perform your due diligence beforehand.

That includes running a vehicle history report through AutoCheck by Experian. Once you enter the vehicle identification number (VIN) or license plate number, you'll receive access to critical information about the car's past. For example, you may discover if the car's been in an accident, marked as a lemon or reported as stolen or repossessed.