How a Rebuilt Title Affects Car Insurance: What You Need to Know
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If you're considering buying a car with a rebuilt title, you need to know how its title status will affect you. You maybe wondering exactly how a rebuilt title affects insurance, and what are your options for controlling coverage costs?
To answer those questions, you need to understand what having a rebuilt title means about your vehicle's history. That history may mean you insure it differently than you would if it had a clean title.
What Is a Rebuilt Title?
A rebuilt title indicates that the car was once a "total loss," but a mechanic has reconstructed it to make it legally drivable.
A car is a total loss when it suffers significant damage and the repair costs would exceed or come too close to the car's value. Total loss thresholds vary by state but typically range from 70% to 75% of the actual cash value.
Whoever retains the car may sell it for parts or apply for a salvage title if they plan to repair it. At that point, the vehicle is not legal to drive.
Differences Between Rebuilt and Salvage Titles
Before you register or drive a salvage vehicle, a mechanic must repair it so it passes a state safety inspection.
Once a salvage car passes inspection, the state can issue a rebuilt title. Some states call this a rebuilt salvage, restored, previously salvaged, or reconstructed title.
Rebuilt title vehicles are road-legal and driveable, though they may still have some damage.
How a Rebuilt Title Affects Insurance
It's usually impossible to insure a salvage title before or during the repair process, as the car is unsafe to drive. However, can you get insurance on a rebuilt title?
Typically, you can insure a rebuilt vehicle, but you may have more limited options due to the car's damage history.
Impact on Insurance Rates
Insurance on a rebuilt title typically costs more than clean title coverage. Rebuilt cars often have damage that the rebuilding process didn't address, and that damage can make accidents more likely. Insurers compensate for that risk by increasing the premium on rebuilt title cars.
Coverage Options Available
Some insurers offer limited insurance for rebuilt title cars. You should still be able to get liability insurance, personal injury protection, and any other coverage your state requires.
Obtaining collision or comprehensive coverages may take more work. Insurance companies need to know a car's value to offer these coverages, and estimating an accurate value for a formerly totaled car can be challenging.
Also, if the rebuilt car does end up in an accident, there may be no way of knowing whether the observed damage is new or pre-existing. Severe damage can weaken a car's structure and make it more susceptible to dents and breaks.
Getting the Right Insurance
The best way to find coverage for a rebuilt car is to shop around. EverQuote offers free custom comparisons for any car, including rebuilt vehicles. It only takes a few minutes to see multiple options. Apply for your free comparison today.
Process of Obtaining a Rebuilt Title
If you own a salvage title vehicle, you need a rebuilt title before you can register or drive the car. The process varies by state and usually involves the following steps:
- Obtain a salvage title: Arrange with your insurance company to keep the car, then apply for the title with your state's Department of Motor Vehicles (DMV).
- Rebuild the car: Work with a licensed rebuilder who knows your state's requirements. In Georgia, for example, you need documentation of all added parts.
- Pass inspection: Bring your car and any required forms and documentation to a salvage inspector
- Submit forms and pay the fee: States may require you to apply for a title after the inspection, or you may be able to complete both steps at once.
Benefits and Drawbacks
A rebuilt car can be a cost-efficient option, but there are risks to consider.
Pro: Cost Savings
Rebuilt titles are less attractive to consumers, so they typically cost less than their clean-titled counterparts — between 20% and 40% less, according to a dealer.
Pro: Potentially High-Quality Repairs
Rebuilders can take great care in their work and leave you with a car in excellent shape. If the restorer does a top-notch job, you might get an impressive bargain.
Con: Resale Value Concerns
According to Consumer Reports, rebuilt cars typically have low trade-in values, and many dealers will not accept them. Privately selling them can be challenging because many consumers are wary of salvage histories.
Con: Potential Hidden Issues
Some rebuilt cars have problems that don't show up for months or years after the damage occurs. For example, flood damage can permanently affect a car's electrical system.
Factors To Consider Before Buying
Before you rebuild a car or buy a rebuilt title vehicle, weigh these factors:
- Safety and reliability concerns: Even if you had significant contact with the rebuilder, it may be hard to know the extent of existing damage. Structural and mechanical weaknesses can remain hidden for years.
- Repair history: A rebuilt title car may have an extensive repair history beyond the reconstruction. The less you know about that history, the higher the risk.
- Financing issues: Some lenders won't finance rebuilt vehicles because they see it as a financial risk. If costly repairs come up, the buyer could default on a loan. Smaller lenders are typically more flexible, but you might still face high rates.
- Inspection requirements: Many states require safety and emissions inspections for all registered cars. Any lingering damage might affect a rebuilt car's ability to pass inspection.
- Insurance implications: You may pay more to insure a rebuilt car, and even then getting the coverage you need may be challenging.