Can I Finance a Car with a Rebuilt Title?

One way to minimize the cost of purchasing a vehicle is to consider buying one with a rebuilt or salvage title. While these vehicles have sustained prior damage, this often means that you can purchase them for less than a similar model with no prior damage. However, if you need to finance the purchase, you're likely to have difficulty obtaining a loan.

Identification

A rebuilt title may be issued to a vehicle that has been declared a total loss by an insurance company after an accident and is then reconstructed. Each state has specific guidelines that vehicles must meet to receive a rebuilt title before being put back on the road, and many require that they be inspected first to ensure their safety. The vehicle owner must also find an insurance company that is willing to provide coverage for the vehicle.

Obtaining Financing

According to the Fox Business website, it can be extremely difficult to obtain financing for a vehicle with a rebuilt title. Financial institutions tend to shy away from rebuilt vehicles because it can be difficult to assess the true amount of structural damage the vehicle sustained. Understandably, banks are leery of loaning money for a vehicle with uncertain reliability and that may not last for the life of the loan. Another problem is that insurance companies are often reluctant to insure rebuilt vehicles.

Borrower Default

Banks also avoid financing rebuilt vehicles because of concerns over borrower default. Some potential borrowers may resort to purchasing a rebuilt vehicle because credit issues may prevent them from obtaining a loan for a standard vehicle. If the borrower defaults on a loan for a vehicle with a rebuilt title and the lender needs to repossess it, the vehicle's low value means the bank will receive little when it attempts to resell it.

Options

If you have a very good relationship with your current bank and have previously financed vehicles through it, you can see if it is willing to finance a rebuilt vehicle. Another option is to explore purchasing a vehicle through rebuilt vehicle dealers such as SalvageTitleAutos.com, which offers financing in some cases. You can also apply for a personal loan from a source such as a consumer finance company and use the money to purchase a rebuilt vehicle.