With the average used car sold for over $27,000 as of October 2022, you may be looking for ways to save money on a new vehicle. According to Kelley Blue Book, a car with a rebuilt or reconstructed title can cost 20% to 40% less than a comparable car with a clean title. Still, there are some serious factors to consider before completing the purchase.
One of the most critical issues is insurance. Can you get full coverage on a rebuilt title vehicle, or are you stuck with state-minimum coverage? Although companies won't insure vehicles with salvage titles, some will insure cars with rebuilt titles. However, whether a rebuilt vehicle is eligible for full coverage depends on the insurance company and its policies.
What are salvage and rebuilt titles?
A salvage title is the title of a vehicle that’s been declared a total loss. A rebuilt title is when a salvage title vehicle has been repaired.
Here’s how the process typically works. A vehicle owner will usually report an incident to their insurance company when their car is in a severe accident or damaged in a storm or fire. The insurer will send out an adjuster, a professional that will assess the damage and estimate the cost of repairs. If the repairs would be too costly relative to the car’s value, the insurance company will declare the vehicle a total loss.
When a car is “totaled,” the insurance company pays the owner the car’s cash value minus the policy deductible. The vehicle is issued a salvage title that shows it was declared a total loss, and it’s typically sold for scrap metal or parts.
Because cars with salvage title designations were significantly damaged, salvage cars aren’t legally roadworthy, and they cannot be registered or insured.
In some cases, owners may want to keep the salvage title car and restore it. Or buyers will purchase a car with a salvage title because of that particular vehicle’s rarity, potential value, or lower cost. The buyer may believe they can fully repair the car and be willing to invest the time and money to fix any structural or mechanical issues affecting the vehicle.
If the buyer successfully repairs the car, they can apply for a rebuilt or reconstructed title for the car. If the car passes an inspection, the owner will receive a rebuilt title for the vehicle.
Although insurance companies won’t insure salvaged vehicles, some will insure cars with legitimate rebuilt titles.
How to obtain a rebuilt title
The process to obtain a rebuilt title varies by state. But generally, owners have to follow these steps:
- Get a rebuilder license. In some states, salvage vehicles can only be purchased for repairs or restoration by licensed rebuilders.
- Take photos before starting work. As part of the titling process, you’ll often be asked for photos of the car in its pre-repair state, so take photos before beginning your project.
- Complete the necessary repairs. You can make the repairs yourself or work with a mechanic. Make sure you keep receipts and good records. You will likely have to submit a list of the parts you purchased along with their receipts. If you purchase used parts, you will need to submit the part name and the vehicle identification number (VIN) of the vehicle from which the part was taken.
- Apply for inspection. Typically, there is a form you need to submit along with photos and receipts to request an inspection of the vehicle. You may have to use a state inspector, or some states allow you to tow the vehicle to a private inspector for an additional fee. The inspector will inspect the car and the repairs that were made and decide if the car is roadworthy and qualifies for a rebuilt title.
- Submit a request for a rebuilt title. If the inspector passes the vehicle, fill out the necessary forms for a rebuilt title and tag and submit it to your state’s department of motor vehicles. You will usually have to pay an additional fee and submit the inspector’s report.
How to get insurance on a rebuilt title
Once your car has received a rebuilt title, you can work on getting insurance for your vehicle. However, not all companies will insure rebuilt vehicles because of the potential for lingering issues.
Those who do insure them may charge higher premiums than if your car had a clean title status because it’s considered a higher-risk vehicle. Alternately, the insurer may only offer limited coverage options for rebuilt title insurance, such as liability-only insurance coverage, rather than full coverage.
To get coverage, contact several auto insurance companies and insurance agents or brokers to discuss your options. You can use our list of the best car insurance companies as a starting point.
The insurer will likely ask for a copy of the rebuilt title, and the insurance company may request a certified mechanic’s statement before issuing an insurance policy. The insurer may also want photos of the vehicle and your car’s original repair estimate.
TipYour insurance rate will also be impacted by the type of vehicle, your age, your driving history, your location, and other factors.
Can you get full coverage on a rebuilt title?
Not all auto insurance companies will insure rebuilt vehicles at all. If they do, they may only provide state-minimum liability coverage rather than collision and comprehensive insurance. Why is that a big deal? It affects how much coverage you have in an accident.
Liability insurance refers to bodily injury and personal property liability. These coverages pay for damages you cause to someone else or their property in an accident.
Collision coverage pays for repairs to your vehicle if you’re in an accident, whereas comprehensive insurance pays for repairs caused by issues other than an accident, such as a fire or theft.
Rebuilt cars are considered higher-risk vehicles because it’s difficult to differentiate between old and new damage if it’s in an accident. As a result, some companies refuse to offer collision and comprehensive coverage for rebuilt cars, or they may charge significantly higher premiums.
TipFull coverage insurance typically refers to policies with liability, collision, and comprehensive coverage.
What are the negatives of a rebuilt title?
The primary negatives of a rebuilt title are that they are more difficult to insure and finance, and their resale value is much less.
Is a rebuilt title the same as a salvage title?
Salvage titles and rebuilt titles are very different. A salvage title is issued after a car has been declared a total loss. They are not roadworthy and cannot be legally driven on public roads, registered, or insured.
If someone buys a vehicle with a salvage title and repairs it, the car can be inspected. If it passes the inspection, the car may qualify for a rebuilt title. Cars with rebuilt titles are able to be registered, insured, and driven.
Do rebuilt titles affect your credit score?
A rebuilt title doesn’t affect your credit score on its own. However, it’s more difficult to get financing for cars with rebuilt titles if you’re not buying it with cash, so you may have to take out a higher-interest personal loan to purchase the car. With a higher rate, your payments will be more expensive, and you’re at a greater risk of falling behind and damaging your credit.
If you're considering buying a car with a salvaged or rebuilt title because of the lower sales price, be aware of the potential risks.
It may be more difficult and expensive to insure and finance the vehicle, even if it’s a rebuilt title car. You’ll likely need to get several insurance quotes, and your insurance rates may be higher than you might expect.
In addition, the car will likely have a lower market value. Make sure you do your homework so you fully understand what you're getting into.
Before making an offer on any used vehicle, it’s important to know the vehicle history. Look up its VIN with the National Insurance Crime Bureau’s VINCheck tool. It will tell you if the car was ever reported as a salvage vehicle or involved in an insurance theft claim.
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