Revived Rides: Salvage, Rebuilt, and Other Car Title Types
Questions, answered
You find your dream car at a price you can afford, but it has a branded title. Is it worth the risk? Before you can answer that question, you should know what you're up against. Here's a closer look at branded titles (including salvage titles and rebuilt/reconstructed titles) and the must-know issues associated with owning a branded-title vehicle.
SUMMARY
What is a branded title?
To know what a branded title is, it helps to start with what a branded title isn't. The usual state of a vehicle title is "clean," meaning the car has no special designations or restrictions. A branded title, on the other hand, designates that a vehicle has been seriously damaged or deemed defective in the past. You can think of it as a black mark on the vehicle's history.
There are various types of branded titles, including some you may already know about -- such as salvage titles or junk titles. These brand types, also known as labels, represent specific forms of damage or the vehicle's current status.
Below are definitions for six common branded title labels.
What is a salvage title?
A salvage title means a broken car that isn't yet junk. A vehicle that has been so badly damaged that an insurance company declared it a total loss. Does that make a salvage title bad? Not necessarily.
State law defines how insurers decide to "total" a car. In Florida, for example, the car is a total loss if the repair costs are 80% or more of the car's value.1 Other states require insurers to compare the car's scrap value plus repair cost to the vehicle's actual cash value. If the actual cash value is the lower number, the car will likely be a total loss.
Once the insurer designates the car as a total loss, the insurer or the car owner can apply to the state for a salvage title. The state may require a vehicle inspection before it issues the title.
You can not drive a car with a salvage title legally on public roads, nor get it insured either.2 You could transport it to storage, fix it up, and then apply for a rebuilt or reconstructed title when it's safe to drive. Note that in some states, you have to be a licensed rebuilder to apply for a rebuilt title.
What are reconstructed, reconditioned and rebuilt titles?
A rebuilt, reconditioned, or reconstructed title means the car had a salvage title before. To reclassify a car from salvage to rebuilt, someone had to repair the car, pass a state DMV inspection, and apply for a rebuilt title.
You should know that the state inspection is not a guarantee the car is fully restored to its pre-damage condition. Each state has its own inspection process, and some are more detailed than others. For the most part, the inspector will verify that the builder used suitable and legal parts to restore the car, and that the car is generally in working order.
There are two important points to note about cars with rebuild titles:
- The value for a rebuild title car is about 20% to 40% less than a similar car with a clean title.
- The car will always have a rebuilt title. This is a permanent designation; you cannot restore a clean title to a rebuilt car.
What is a lemon title?
Lemon laws allow consumers to return or replace defective vehicles. If you return a car under a lemon law, the state should assign a lemon title to that vehicle. This way, if the dealer attempts to resell the car, prospective buyers will know of the car's history.
Each state decides what constitutes a "lemon." Often, the car must be relatively new, with a minimum number of service attempts to fix the same issue, and a minimum amount of time spent in the shop getting repairs.
What is a junk title?
A car with a junk title is legal for scrap value or spare parts only. It cannot be rebuilt, retitled, registered, or insured. Junk status on a car's title is permanent.
What is an odometer rollback title?
If a state proves someone had tampered with a car's odometer reading, the state will assign an odometer rollback title to that vehicle. With over 400,000 odometer fraud cases a year, it's a prevalent problem to watch out for.
What are water or hail damage titles?
Many states may also use water damage or hail damage branded titles. These show severe damage from flooding or a hailstorm. Water damage can be particularly challenging to mitigate since it can lead to unseen mold and electrical issues later.
Branded titles are state-specific
You should know that state DMVs define the branded titles used within their jurisdiction. Therefore, these definitions and even the types of branded titles can vary across state lines. States also define how branded titles are managed and what sellers must disclose when selling branded-title vehicles.
The state-specific nature of branded titles can be confusing for car buyers, particularly for those purchasing out-of-state vehicles. Protect yourself from misunderstandings by pulling a vehicle history report and verifying the branded title definitions in the car's home state and your own state.
Risks of buying a car with a salvage or junk title
Salvage and junk titled cars warrant their own discussion because they are not legally drivable or insurable. As such, there isn't much upside to owning or buying cars with these branded title labels.
You might invest in a salvage vehicle if you are (or know) a mechanic who's knowledgeable about the salvage and rebuilt title rules in your state. You'd have to be confident you could obtain a rebuilt or reconstructed title for the car. If you can, you could drive the car yourself or try to sell it at a discount.
You have fewer options with a junk title. You can rebuild a junk car, but it will never be legal to drive on public roads and it won't be insurable. You could use the vehicle on your own property, but only if you feel it's safe to operate. Outside of that scenario, junk cars are only useful for spare parts.
Risks of buying a drivable vehicle with a branded title
Purchasing a vehicle with a rebuilt or other type of branded title comes with three primary risks: getting the car insured, keeping the car functional, and being able to resell the titled car later.
1. Getting insurance
If you have a good driving record, you should be able to get liability coverage for a branded-title car. You'll be more challenged to find a full-coverage policy, however. Some insurers will be reluctant to write comprehensive and collision policies for a car that another insurer wrote off. If you have or acquired a rebuilt title, you may need to provide a statement from a certified mechanic, photos of the car, and documentation of the repairs made.
Your best strategy here is to search for affordable insurance before you commit to buying the car. Plan on shopping around and gathering at least three, and preferably five, quotes.
2. Mechanical failures
Even if you know a lot about cars, it could be tough to verify the quality of the repairs made. If the mechanic missed something or cut corners somewhere, the car could continue to need repairs or, worse, be unsafe to drive. (To make things easier, our car inspection PDF is a handy way to take a complete inventory of all parts and systems of your vehicle).
As an extreme example, a family won a $15 million lawsuit in 2009 against an auto body shop that faked repairs on a salvage-titled truck. The shop had glued the truck's airbags shut instead of replacing them. Subsequently, when the truck got into an accident, the airbags didn't deploy and an 18-year-old boy died.3 The story is a morbid reminder of the safety risks that come with rebuilt cars.
Plan on having a mechanic you trust inspect the car independently to identify any obvious issues.
3. Trade-in or resale value on a branded title
A car with a branded title will be harder to sell and worth less than the same car with a clean title. Many private buyers will be reluctant to buy a car with a branded title. A dealership might accept a rebuilt-titled car as a trade-in, but you won't get as much for it. Dealers don't usually sell branded title vehicles on the lot, so they command a much lower trade-in value.
Should you buy a car with a branded title?
Here's what it comes down to. Buying a branded-titled car makes the most sense if all the following conditions apply to your situation:
You intend the keep the car and drive it for the rest of its useful life.
You can find the insurance coverage for the titled car at an affordable price .
You have had your mechanic inspect the car and you are comfortable that it's safe to drive.
In short, a branded-title car is not likely a good investment, but it may be an economical choice if you need cheap transportation. Just make sure that saving on the purchase price doesn't require you to compromise your safety.
- Vallet, M. (2021, June 9). Total loss thresholds by state. Accessed February 5 2023 from CarInsurance.com. https://www.carinsurance.com/Articles/total-loss-thresholds.aspx
- Car and Driver. (2021, January 22). Can you insure a car with a salvage title? Car and Driver. Accessed February 5 2023 from https://www.caranddriver.com/car-insurance/a32620260/can-you-insure-a-car-with-a-salvage-title/
- CBS8.com. (2009, January 22). Air bag fraud leads to $15 million verdict. Accessed February 5 2023 from cbs8.com. https://www.cbs8.com/article/news/local/consumer-alert/air-bag-fraud-leads-to-15-million-verdict/509-a36326df-764f-4433-bdf1-ae632da6715d
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