What Is a Rebuilt Car Title?

When purchasing a pre-owned vehicle, one of the first things people ask is, “Has it been in an accident?” Although this merits a yes or no answer, there is more nuance. For example, a minor fender bender is less concerning than a major collision with frame damage. Weather-related damage from earthquakes, tornados, and floods further impacts vehicle integrity. These issues may result in a repaired vehicle being issued a rebuilt title. 

Here’s a quick explanation of a rebuilt car title and what it means for your potential purchase.

What Is a Clean Title? 

A clean title indicates that the car has never been totaled and the odometer has never been rolled back. Note that a clean title can still have a lien on it. A lien means you cannot sell the vehicle until the lienholder has been paid.

The status of a clean title changes when a car is damaged by an accident, fire, flood, or other cause. If the car would cost more to repair than its value, it’s considered a total loss.

What Is a Salvage Title? 

A vehicle can also be “totaled” if repair costs reach a certain percentage of its value. The exact percentage rate varies from state to state but is usually around 70 percent. Thus, if a car is worth $10,000 and the repair estimate is $7,000 or more, the vehicle is likely considered “totaled.”

Regardless of how exactly a car is totaled, it loses its clean title. Instead, the state issues a new salvage title. This title is intended to warn buyers that the car is no longer safe to drive. A vehicle with a salvage title can’t be driven and, in most states, can’t be registered.

In this case, the insurance company sells the car off for scrap or to a buyer who wants to repair it. If the owner doesn’t have comprehensive insurance coverage, they’ll have to part it out, fix it, or sell it independently. This is why you see cars with salvage titles on sites like Craigslist.

How Do Cars Receive a Rebuilt Title? 

If a car with a salvage title is repaired to a drivable state, it receives a rebuilt title. Generally, it needs to undergo an inspection as part of this process to ensure it’s safe to drive.

Keep in mind that different states have different inspection requirements, and a select few don’t require any inspection. When in doubt, research your local laws.

How Does a Rebuilt Title Affect the Value of the Car? 

A vehicle with a rebuilt title is typically worth 20 to 40 percent less than an equivalent car with a clean title. The exact value depends on the car model, the type of damage it sustained, and the local automotive market.

Is a Car With a Rebuilt Title a Good Deal? 

A lot depends on state laws. The more rigorous the inspection requirements, the more you can count on a rebuilt car to be reliable. If you trust the inspection process, you can potentially net significant savings.

On the other hand, a rebuilt car title comes with drawbacks. For one thing, if you don’t trust the inspection process, you could end up footing the bill for costly repairs.

In addition to the inspection process, another important consideration is what caused the vehicle to be rebuilt in the first place. For instance, if the car was originally declared a total loss due to hail damage that may not have impacted any mechanical or structural elements, it might not be as risky of an investment. However, a flood-damaged vehicle may pass an initial inspection only for issues to occur down the road as corrosion sets in. 

On top of increased future repair costs, vehicles with rebuilt titles suffer from high depreciation. If you want to resell your car in the future, you’ll suffer the same 20 to 40 percent loss due to the rebuilt title.

What to Look for When Buying a Vehicle With a Rebuilt Car Title

First, obtain a vehicle history report, either from your state’s DMV or from a trusted third party, and determine why the vehicle was salvaged.

Frame damage is something you should think twice about. A dented or bent frame must be realigned, requiring significant metalwork and often welding. The wrong mechanic can butcher the job, leaving you with underlying damage.

A misaligned frame puts significant strain on several of your vehicle’s systems. The drivetrain, brakes, and steering will all need to compensate. Not only that, but it can cause your tires to wear unevenly.

On the other hand, in some states, excellent vehicles can be salvaged if they’ve been abandoned. In this situation, you can get a pristine vehicle at a steep discount.

The next step is to find out where the car repairs took place. Find out if it was a reputable establishment or if the mechanic is known for cutting corners. With the proliferation of online reviews, that information is easy to find.

Similarly, make sure to review the repair records and receipts. This allows you to verify the scope of the work.

If anything seems even slightly off, have the car inspected by a mechanic you trust. It’s worth spending tens of dollars on an inspection that could save you thousands in repairs later on.

Financing a Car With a Rebuilt Title

Another complication of purchasing a vehicle with a rebuilt title is financing. Lenders consider rebuilt-titled vehicles more likely to have expensive maintenance issues, which increases the likelihood the borrower will default on the loan. As a result, they may refuse to issue a loan on a car with a rebuilt title due to the added risk involved. Beyond the challenge of finding a lender willing to finance, you can expect higher interest rates on a car with a rebuilt title than on a loan for a car with a clean title. 

Demonstrating that the vehicle is in excellent condition by sharing a mechanic’s thorough review can assist with loan approval on a rebuilt-titled vehicle. While the lender absorbs a risk by loaning you money for a car in this condition, you also risk owing more than the vehicle is worth due to the high depreciation of rebuilt-titled vehicles.

Are Rebuilt Cars Difficult to Insure? 

Often, rebuilt cars can prove challenging to insure. Many insurers won’t offer comprehensive coverage on rebuilt vehicles, only liability coverage. If you do manage to find comprehensive and collision coverage, you’re liable to higher premiums, as well as lower payouts.

The reason for this is twofold:

• A car with a rebuilt title is less valuable, and therefore, the payouts are correspondingly lower.
• There may be hidden damage that wasn’t found during the inspection. Therefore, there is an elevated risk of failure.

Summary 

In summary, here’s what a rebuilt title means:

• A car is initially sold with a clean title.
• When that car is severely damaged, it is issued a salvage title.
• The salvaged car is then repaired and inspected, and consequently, is issued a rebuilt title.

Keep in mind that while you may save money with the initial purchase price of a vehicle with a rebuilt title, you must calculate the total impact on your monthly budget. If you are financing, consider the higher interest rate and insurance premium. Once you add in the lower resale value and potential higher repair costs to the scenario, the possible savings might not be worth the risk to you. 

Remember that title inspection standards vary from state to state. Be sure to request and review records, have a trusted mechanic inspect the vehicle, and take into account why the vehicle was salvaged in the first place. 

Matt Yantakosol is a lifelong automotive enthusiast and former consultant focused on the consumer aspect of the industry. He has traveled to New York, Detroit, Chicago, L.A., Paris, Geneva, Frankfurt, and Tokyo Auto Shows to track and observe the newest industry innovations. In addition to JDPower.com, Matt's writing has appeared on Pcarmarket.com.

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