What does a rebuilt title mean?

Key points

• A rebuilt title means a car has been declared totaled by the insurer but was subsequently and sufficiently repaired.
• Cars with rebuilt titles may have lower price tags than vehicles with clean titles, but they can be challenging to finance — and resell.
• Insurance is available for cars with rebuilt titles, but you may not be able to get full coverage.
• If you purchase a car with a rebuilt title, you could end up having to pay for more repairs down the line.

If you’re in the market for a new car and on a budget, a used vehicle can be a good alternative to one fresh off the line when it comes to saving money.

But used-car territory can be vast and unknown. For instance, as you shop around you may come across great deals on cars with something called “rebuilt titles.” What exactly does that mean? Is it a red flag for a dangerous deal, or the opportunity of a lifetime? Here we’ll help you decide whether purchasing a car with a rebuilt title is right for you.

What does a rebuilt title mean?

A rebuilt title means a car has a history of substantial damages, but has been officially cleared as road-worthy.

Every new car starts with a clean title, which means it’s never been totaled in an accident, had its odometer rolled back, been flooded or deemed a “lemon” and has been out of commission for more than 30 days. A car with a clean title might have had some damage, sure — a fender bender, even a serious accident — but the key is that the repairs did not cost more than the car is worth.

What if the car was in an accident and the damages cost more than the value of the car? In this case, the car is issued a salvage title, which essentially means it’s un-drivable — usually legally so. Most states won’t register a vehicle with a salvage title until after it’s been rebuilt. Insurers may pass on offering coverage until that time as well.

After that salvage-title vehicle has been repaired well enough to pass a state inspection and be considered drivable again, it receives a rebuilt title.

How does a rebuilt title affect a car’s value?

Cars with rebuilt titles do tend to have lower values than similar vehicles with clean titles would: Kelley Blue Book suggests deducting 20% to 40% of the value for a salvage-title car, which translates into lower asking prices once the vehicle has been rebuilt.

That said, lower value isn’t always a good thing down the line. Even clean-title cars depreciate rapidly, and if you’re hoping to resell the vehicle later, you could have a hard time recouping your costs.

You could also face problems if you’re hoping to finance the car rather than pay for it in cash.

“Even if an automobile has been fixed and passed state inspection, financing a car with a rebuilt title can be difficult,” said Matas Buzelis, an automotive expert at carVertical, a site that checks vehicle history. “Lenders have the right to refuse to finance a vehicle with a rebuilt title if they are concerned about the vehicle’s maintenance history or capacity to drive safely on the road.”

Tip: If you don’t have a lot of cash on hand and are aiming for an auto loan, a rebuilt title might not be right for you. It could be hard to find a lender who will take on a car with a rebuilt title.

Can you insure a car with a rebuilt title?

The short answer: Yes. But there are some caveats.

Insurers can be a little skeptical about cars with rebuilt titles, given their complex histories and the risk of future maintenance issues. You might only be able to get liability car insurance, as opposed to comprehensive and collision coverages, said Dan Ferrara, who spent more than 30 years selling auto insurance for Liberty Mutual.

This isn’t a huge problem in that liability-only car insurance is all you need to legally drive a vehicle in most states. However, your assets won’t be protected in case of theft, fire or traffic accidents with this coverage.

As far as the premiums you’ll pay for liability coverage for a car with a rebuilt title, “the price most likely won’t be any different than the same year and model vehicle with a regular title,” said Ferrara. Though how much you’ll pay for car insurance will vary based on your location, driving history and other factors. 

So while you can affordably insure a car with a rebuilt title, the coverage might be lacking. It really all comes down to your own personal risk tolerance.

Is a car with a rebuilt title safe to drive?

Perhaps the most important question is one that goes beyond finances: Is a car with a rebuilt title safe for driving?

The official answer is yes — that’s why the vehicle’s title was able to be upgraded from salvage to rebuilt. But serious damage history does have the potential to lead to serious mechanical failures in the future. So, keeping the vehicle safe to drive could cost you — especially since your insurer is unlikely to provide extensive coverage.

How do you know if a rebuilt title is right for you?

Unfortunately, there’s no easy answer to this question. Not all vehicles with rebuilt titles are created equally. They each have their own unique history, some of which is likely to remain a mystery to the consumer.

While an in-depth inspection could help you hedge your bets against buying a nightmare, you could still face issues getting the car financed or reselling it later, not to mention getting the best car insurance coverage. The safest bet is likely to pass on the rebuilt-title car, said Buzelis, “unless your budget is tight and you can’t afford a car with a clean title.” 

But if you do happen onto a diamond in the rough, a rebuilt title could save you thousands of dollars on an asset that’ll depreciate anyway.