When shopping for a used vehicle, you may find one with a rebuilt, or salvage, title. While these vehicles may be a good fit for the right buyer, it's important to understand all aspects of them before deciding to buy or pass.

To help you better understand what each title means, here's a closer look at both:

What is a salvage title?

A salvage title is designated when the vehicle's repair costs exceed its market value, and the vehicle is considered totaled. This usually occurs when an insurance company writes off the vehicle. Some of the most common reasons a car may have a salvage title are accidents, weather (especially flooding) or theft of the car. Vehicles that are given a salvage title may not be safe to drive because of the danger they pose due to 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 vehicle's prior history. To receive a rebuilt title, you must undergo a series of tests to ensure that it is safe to drive in some states. However, in other states, there may be no requirement to inform prospective buyers of the vehicle's history.

How does a car get a salvage or rebuilt title?

If a vehicle suffers extensive damage with repairs totaling 70 to 90% of the car's value, then the insurance company will consider the car a total loss. Once that determination has been made, a state motor vehicle agency changes the title of the car from clean to salvage or junk. After you are presented with a salvage title, you cannot drive, sell or register the vehicle until it has been repaired.

At this time, the salvage vehicle is usually 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 have to pass safety requirements before the motor vehicle agency will issue a rebuilt title. By giving the repaired vehicle a rebuilt title, it tells the buyer more about the car's history.

How does a rebuilt title affect the value of a car?

A vehicle with a rebuilt title will likely have a lower value because it suffered significant damage. Compared to similar models with clean titles, a car with a rebuilt title could be worth 20 to 40% less, 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 lower. 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 long-term insurance. Also, it could be difficult to insure your vehicle. And going back to value, while you might be able to get a deal to buy it, if you plan to sell it at some point, you won't get nearly what you'd get with a car with a clean title.

How to obtain insurance with a salvage or rebuilt title?

Salvage title insurance can be difficult to find since the vehicle, in many cases, is not 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 insurers will not extend full coverage for salvage rebuilt cars because it is difficult to assess all of the pre-existing damage the vehicle has incurred. It is unlikely that comprehensive and collision coverage will be offered with this type of title.

If an insurer offers comprehensive and collision coverage, you can expect a lower insurance payout for an accident or incident. Since a reconstructed title means the vehicle is no longer in its original, intact condition, its value is much lower. In addition, because there may be undisclosed, or unseen damage to a rebuilt vehicle, insurance companies will also consider this type of title to be more likely to pose a risk on the road.

What are some advantages and disadvantages of having a salvage or rebuilt title?
Buying 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.

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Buying a car with a rebuilt title, on the other hand, can lead to more costs in the long run if the repairs made are not up to par. When you purchase a rebuilt salvage vehicle, you are accepting that extensive damage has been done to the vehicle. In some cases, there may still be undisclosed, or unseen damage that could arise again.

Also, even if the vehicle has been fully repaired, you may have trouble finding car insurance. In many cases, carriers that 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 is required for my car to earn a rebuilt title?

Each state has its processes in place, with some more stringent than others. The best approach is to contact your state's Bureau of Motor Vehicles to learn about the process for obtaining a rebuilt title.

Is a salvage titled vehicle right for me?

If you are an experienced mechanic or know someone who can do a great job at a low cost, then a salvage title 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 like an abandoned vehicle could earn the salvage title distinction.

Next, see if you can determine who did the repair work. Research them online, taking into account reviews. Doing these things will help you better understand how that vehicle is doing