Rebuilt vs. salvage titles: How are they different?

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In a Nutshell

The difference between a rebuilt and salvage title depends on whether a previously damaged car is safe to drive again.  A salvage car can be rebuilt and have a rebuilt title, making it possible to get it on the open road again — but it may be prone to mechanical failure and can be more difficult to insure.
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Vehicles with a salvage or rebuilt title can be very tempting to buy because they’re often much cheaper than vehicles with clean titles.

Buying a vehicle can be exciting. But the sting of a car’s retail price can take away all the fun. If you’re tempted to get a more affordable set of wheels at a place like an auction, Craigslist or a local mom-and-pop dealership, make sure you look up the car’s vehicle history report — and beware of salvage or rebuilt titles. These kinds of titles indicate that the vehicle you’re considering has a checkered past — there’s a lot to consider when buying a rebuilt vehicle.

The laws surrounding salvage and rebuilt vehicles vary by state. In certain states, a car that’s been totaled or otherwise declared a total loss and issued a salvage title is no longer legally allowed on the roads. But if it passes an inspection, you can be back in the driver’s seat if it’s reissued a rebuilt title.

Car title types

A car’s title is a legal document that establishes who the owner of the car is. If your auto lender has a lien on your car, it might hold onto the title until you pay off a car loan in full, or the title could be transferred to you by a seller if you buy a car outright in cash. A car’s title can tell you important facts about the vehicle.

Clean title

A clean title doesn’t have any records indicating that a vehicle is or has been unsafe to drive in the past. Keep in mind that a clean title doesn’t mean you won’t have any mechanical problems with the vehicle you’re considering, but it’s an assurance that the car hasn’t been totaled or suffered significant damage.

Other types of titles

There are many different types of titles that can mean different things, and the definitions can vary by state. For example, in California, a junk title indicates the vehicle has been dismantled by an individual or dismantler. In Michigan, if the title is marked as junk or scrap, it means that the vehicle can’t be titled again.

It may be difficult to know how to tell whether a car has been issued a title brand or junk title in the past. The Federal Trade Commission recommends getting an independent review of a vehicle’s history and using trusted sources to check whether there is anything funky with the car’s past. For example, the Department of Justice’s National Motor Vehicle Title Information System provides information about a vehicle’s title and certain damage history for a fee.

What you need to know about salvage titles

Typically, a salvage title means that the car has been deemed a total loss and is no longer safe to drive. Insurance companies generally make the call on whether the car is considered “totaled,” and what happens next depends mostly on which state you live in. In Wisconsin, for example, a car may be considered salvage after an insurance company has determined that its damage would cost more than 70% of the car’s fair market value to fix.

When an insurance company declares a vehicle as a total loss, the state motor vehicle agency handles the process of salvage title, and the process varies by state. If a salvage title is issued, you may not be able to legally drive the car in your state. But that doesn’t mean you can’t still cash in. If you sell the car for scraps and parts, you may be able to make some money.

What you need to know about rebuilt titles

Some states have rebuilt titles, indicating the car used to have a salvage title but has since been rebuilt. For example, in Wisconsin a car with salvage title can become rebuilt salvage after passing a state salvage inspection. It’s issued a rebuilt title instead of a clean title to prevent you from paying more for the car than what it’s worth. Once a car is issued a rebuilt title, it won’t ever be issued a clean title again. It’ll always carry the mark on its title.

Even if a car has been rebuilt by qualified professional mechanics, there’s always a chance that something hidden went unfixed. This can especially be an issue with rebuilt cars — that’s why they’re cheaper.

Next steps

Whether or not it’s worth it to buy a car with a rebuilt title is up to you. One thing’s for sure, though: Make sure you get an inspection from a qualified mechanic before you buy anything. This will help flag obvious problems, and the mechanic may be able to give you insight into other expenses you may face down the road.

Finally, check with your insurance company before you buy a car with a rebuilt title. It can be difficult to find an insurance company willing to insure a car with a rebuilt title. The last thing you want to do is buy a cheap car only to find out you won’t be able to use it because you can’t insure it.

About the author: Lindsay VanSomeren is a freelance writer living in Kirkland, Washington. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee. She writes for websites such a… Read more.