Rebuilt Title vs. Salvage Title: What's the Difference?

Something that can be easy to overlook when shopping for a used car is the status of the title. A car's title is a legal document that establishes the person or business that officially owns the car. It lists the VIN of the car, the state where it's owned and various other important information. The status of the title can tell you a lot about the car's history, but what does it mean when it has a rebuilt title or salvage title?

The default is what's called a "clean" title. If a title is clean, that means there has never been a major accident claimed on the car. Two other common title statuses are "salvage" and "rebuilt." Sometimes these terms are used interchangeably, but from a legal standpoint, there are important differences between the two.

A salvage title is a title for a car that's been in a major accident and has been deemed a total loss by an insurance company. However, the definition is not universal. States have different laws about what constitutes a salvage title, you can check your local state's DMV website to learn more about the specifics where you live.

A rebuilt title is issued to a car that used to have a salvage title but has been repaired to a roadworthy condition. Although the title status is officially called "rebuilt," it does not necessarily mean the car has been rebuilt from the chassis up. In order for a car to go from salvage to rebuilt, it needs to be inspected by someone from the state and deemed fully functional and safe to drive.

What's tricky about buying a car with a rebuilt title is you never truly know the extent of the damage it took in whatever accident happened that gave it a salvage title in the first place. Sometimes damage can be purely cosmetic, but be enough to be considered a total loss. You'll want to have it looked at by a seasoned mechanic before deciding to make the purchase.

Another consideration is insurance. Some insurance companies won't offer full coverage for a car with a rebuilt title. If you're considering buying a car with a rebuilt title, check with your insurance provider first to ensure you can get at least some coverage.

As for salvage titles, you'll definitely only want to get a car with a salvage title if you're an experienced mechanic ready to take on a project. If you can successfully get the car in good enough condition to earn a rebuilt title, you could either flip it for a nice profit or drive it yourself and save a lot of money.

If you have reservations about buying a car with a rebuilt or salvage title, then stick with clean titles that you don't have to worry about. But if you're willing to take a risk to save a few bucks, then rebuilt and salvage cars can be a nice way for mechanically inclined shoppers to get a good deal.