How to Finance a Salvaged Car with a Rebuilt Title

A salvaged car refers to a wrecked car. There are different legal descriptions from state to state for what a salvaged car is. Usually a salvaged car is one described by an insurance company as being a total loss. This usually means that the car has received massive damage and is not road worthy at all.

If the car achieves a restoration to an operational state and it passes a state inspection, then the car can get a title called a rebuilt title. The cars value is then lowered substantially due to the fact that it was a salvaged vehicle. The much lower value can make it tempting purchase for a frugal buyer but it can be a double edged sword because it can be difficult to get traditional car financing for such a vehicle.

Once you find a car with a rebuilt title for example from a site like you should then consider how you will finance purchase of the car.

Below you will find what financial options you may have for financing a rebuilt title including some important considerations you should keep in mind before you seek finance for such a car.

1. Most banks refuse to finance Rebuilt Cars

Generally, most banks will refuse to finance a rebuilt title because they deem the vehicle to be of high risk. They consider it a high risk because when the bank issues a car loan it usually uses the car itself as security for the loan.

The problem is that the bank finds it hard to accept that another buyer will want to purchase the vehicle because of the status of the title. In short, the bank is not confident that the car will be easily re-sellable and that a value for the sale will be able to cover the cost of the financing in case the buyer defaults on the loan.

2. Alternatives for financing rebuilt cars

Whereas a traditional bank may not be willing to finance a rebuilt vehicle, other lenders will finance a rebuilt vehicle. Credit unions for example, have previously financed such vehicles. If you do your research, you will find willing lenders who will finance such vehicles.

Find out what the criteria for financing rebuilt vehicles is from local lenders and determine if their terms are agreeable to you. You will usually find that and financiers of rebuilt titles will charge a higher interest than normal in order to cover for the risk.

You can also consider paying for the rebuilt vehicle using cash as this will greatly reduce the total cost of the vehicle as opposed to using a loan. It may be easier to take up a personal loan from a bank in order to purchase the vehicle.

3. Important considerations

Before you decide to purchase a salvaged car, you should get a good mechanic to do an independent inspection of the vehicle. The state inspector may not be able to assess structural damage to the car for one reason or another including that he or she may not have the time for a detailed inspection.

You should also note that salvaged cars that have been rebuilt may not be restored to acceptable standards that the original manufacturer intended. The main purpose of rebuilding the vehicle could be so that the vehicle is aesthetically presentable for someone else to purchase.

For example, you may find that sub-standard airbags have been used which could raise safety issues. This makes using an experienced mechanic essential before you purchase a rebuilt vehicle.  

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