What is a rebuilt title or a salvage title?

The definition of a rebuilt title or salvage title depends on the state in which you live and laws specific to that state. 

A good general definition for a rebuilt title (used by CarFax and others) is:

A "rebuilt title" is placed upon a rebuilt or reconstructed vehicle that previously was a salvage vehicle but has now been repaired and restored to operation. These vehicles are often severely damaged before they are rebuilt, and refurbished parts are typically used during reconstruction. In most states, an inspection of the vehicle is required before the vehicle is allowed to return to the road.

Normally, a car becomes a salvage vehicle after an insurance company has declared it to be a total loss after an auto accident.  It then can be sold ("AS IS") to an automobile rebuilder to be used either for parts or to be restored ("rebuilt").

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In general, a salvage vehicle cannot be driven on the highways or have a valid license plate.  A salvage vehicle must be repaired (if that is possible) to become a rebuilt, roadworthy vehicle.  (See "Salvage and rebuilt titles: What you need to know")

If the vehicle is restored, in many states it must be inspected and ultimately a "rebuilt title" can be issued for the vehicle from the state’s Department of Motor Vehicles (DMV). A reconstructed vehicle with a rebuilt title CAN be driven on the highways. The guidelines for getting a rebuilt title vary by state.

For example, the state of Florida requires a vehicle to have a salvage title if the insurance company declared the vehicle a total loss. These titles generally indicate whether the vehicle is "rebuildable" (can be repaired and driven) or "not rebuildable" (must be sold for parts).

In some other states, they “brand” or mark the vehicle's title when the estimate of damages reaches a certain percentage of the vehicle's retail value (New York and Louisiana, designate it at 75 percent).

The rules can be complex for rebuilt and salvage vehicles. For example, the Georgia Department of Revenue notes that anyone who purchases a salvage or wrecked motor vehicle for the purpose of restoring or rebuilding it must be licensed as a rebuilder.

In Nevada, vehicles that have had certain repairs must be titled as rebuilt even if they don’t meet the definition of a salvage vehicle. This applies to any vehicle that has had one or more of the following major components replaced:

• Cowl assembly
• Rear clip assembly
• Roof assembly
• Floor pan assembly
• Conventional frame coupled with one additional major component
• Complete front inner structure for a unibody

Before purchasing a rebuilt vehicle, it should be thoroughly checked out by your own mechanic. You also should check to see if the car can be insured with your current insurer since their underwriting rules may not allow them to write policies for cars with salvage or rebuilt titles.

Many auto insurance carriers simply don’t offer policies for rebuilt cars.  Or if a policy is offered, it may be only for liability and not full coverage (collision and comprehensive coverages) because it’s too hard to determine a rebuilt car’s true value. (See "5 reasons to avoid salvage-title cars.")

If you purchase a vehicle with a rebuilt title you’ll have to shop around to find the right car insurance company for your needs.  Look for insurers, such as Progressive, that allow full coverage on cars with branded titles.