The used car market has been on an interesting ride over the past year. Prices for used vehicles began to surge early in 2022, by September reaching around a 43% premium over pre-pandemic levels, according to a report from J. P. Morgan. Though prices started to drop (slowly) in the last quarter of 2022 as supply chain issued eased and new car production started to catch up, they are still historically high.
This might make you consider all options when it comes to bringing the sticker price down. But one of them probably isn’t worth the risk—so here’s why it’s best to avoid buying a car with a rebuilt title.
What is a rebuilt title?
Table of Contents
A rebuilt title is different, but related to, a salvage title. A salvage title is given to a vehicle that has experienced “significant damage” in the past, according to Edmunds. A rebuilt title, on the other hand, refers to a car that once had a salvage title, but has been fixed by a mechanic and deemed safe to operate by the issuing state. (Every state has a different definition of what they consider a rebuilt or salvage title, so check your state’s DMV website for specifics.)
A car could’ve previously been considered salvaged for a variety of reasons, from being flooded to being totaled after a collision. Regardless of the cause, it means an insurance company once considered it to have suffered more damage than its value justified repairing.
A rebuilt title doesn’t mean that the car has been brought into perfect working order. To upgrade the title from salvage to rebuilt, a mechanic may have only fixed the most glaring issues that were impeding the car from passing the state’s inspection, leaving any other problems as they were. And usually when a car suffers an incident bad enough to render it a salvage title, it’s likely that incident caused other problems as well. Even if they aren’t obvious now, they may become more apparent with time and use.
That means that while will pay much less for a car with a rebuilt title versus a clean title, you can expect to more than make up the difference in repair costs down the road—unless you fancy yourself a DIY mechanic.
G/O Media may get a commission
health
The Lyma Supplement
10 ingredients. One super-supplement.
Lyma makes the next generation of supplements—peer-reviewed and formulated to unlock your potential.
Cars with rebuilt titles are harder to insure
A good reason to avoid a vehicle with a rebuilt title is the trouble you’ll have insuring it. You will typically be able to get liability insurance for a rebuilt title, but obtaining comprehensive coverage will be a challenge. That means if you are in an accident that damages the car, the insurance company likely won’t pay you to repair or replace it, meaning you’ll have lost all the value that would otherwise be paid to you if you’d been able to insure a car with a clean title.
Rebuilt titles mean bad resale value
While you expect your car to depreciate in value over time, it’s nice to know it’s still worth something when you want to get rid of it. But if your car has a rebuilt title, it will be worth much less—between 20% and 40% less, per Bankrate. You’ll also likely have more trouble finding a buyer, especially if you don’t know exactly what happened to the car before you took possession, nor exactly how it was “fixed.” Your best bet will be to sell it to business that offers to pay cash regardless or condition, and accept whatever lowball offer they give you—at which point it will be turned around and sold cheaply at an auction.
Beware of deals that seem too good to be true
If a car is suspiciously cheap, be careful to inspect the title carefully. People don’t sell their car for a great price unless they have a good reason to do so. You should be able to enter the car’s make, model, and VIN into an online database to see if it has any liens against it or if it has been involved in an accident. Some information is available for free, while some vendors may charge you about $10 for a more comprehensive report.
Consider other compromises to lower the price instead
While it’s understandable to look for cheaper options for a used car given the current inflated market, a vehicle with a rebuilt title might be more trouble (and money) than it’s worth. Instead, consider different compromises to bring down the price, such as higher mileage range, a less popular color, or cosmetic dents and dings that don’t affect drivability. In addition to the other advantages of buying a car with a clean title, you will also have a better idea of what you’re getting into.