How to Finance A Salvage Or Rebuilt Title Car Or Truck

One of the main reasons why many people hesitate to buy a vehicle with a salvaged or rebuilt title is the uncertainty regarding financing. Most drivers rely on financing to cover the cost of acquiring their vehicle, so difficulties in obtaining financing can make certain vehicles inaccessible. Fortunately, you can finance a vehicle or truck with a salvaged or rebuilt title, and in this article, we explain how. 

What are salvaged and rebuilt title vehicles?

Before discussing the details of financing, it is important to understand the common terms associated with these types of vehicles. 

Salvaged Title

A salvaged title refers to a vehicle that has been declared a total loss. The vehicle can be classified as salvaged if it has been involved in an accident, stolen, damaged by flooding or fire, or if it represents an insurance liability, such as when the vehicle was slightly damaged in an accident but the repair costs were not economically viable for the insurer. The vehicle is not allowed on the road until it has been rebuilt and inspected. 

Rebuilt Title

A rebuilt title refers to a vehicle that was previously salvaged but has been repaired and then passed the required state inspection. Although it is legal to drive with, it still retains the rebuilt classification. 

Is it wise to buy a salvaged or rebuilt vehicle?

Given that there are potential challenges when buying a salvaged or rebuilt vehicle, you may be wondering if it is a good idea. There is no simple answer to this question, as there are both positive and potentially negative aspects. 

Salvaged or rebuilt vehicles offer significant cost savings, with the potential to save up to 40% of the acquisition cost, but there may be hidden and potentially costly repair costs before the vehicle can be considered roadworthy. The lower purchase price means lower financing costs, and there is an opportunity for skilled mechanics or project seekers to obtain a great vehicle for less money, but you need to be prepared for challenges with insurance and financing. 

Who finances vehicles with a salvaged or rebuilt title?

So where can you find financing for vehicles with a salvaged or rebuilt title? Fortunately, there are a few options, but keep in mind that a good rule of thumb is that a rebuilt vehicle is easier to finance than a salvaged vehicle. Some financing options include:

Traditional Banks

This can be one of the most challenging options, but traditional banks like Chase, Bank of America, and Wells Fargo sometimes offer financing for salvaged or rebuilt vehicles. They often require multiple levels of approval, but if you have a strong personal relationship with the bank, it could be a straightforward solution. 

Personal Loan Lenders

While you may have to pay a higher interest rate, personal loans do not require collateral on the vehicle to secure the loan. This offers the flexibility to finance a salvaged or rebuilt vehicle. Most lenders do not impose restrictions on how you can use the funds from the personal loan, but if you do not have excellent credit, you may find that the interest rate for your situation and needs is not economical. 

Credit Unions

Credit unions are often much more lenient compared to large banks and are often willing to work with you to finance a vehicle with a rebuilt title. If you have good credit, the necessary documentation, and a relationship with the credit union, they may also consider financing a salvaged vehicle. 

If you are currently not a member of a credit union, you will need to find one that suits you. Most credit unions have certain membership restrictions, so you need to live or work in a specific area or be part of a certain industry. However, there are credit unions for people with military ties. Once you are a member of the credit union, you can discuss your needs with the loan officer to find out what restrictions or conditions exist. 

Dealership Financing or Indirect Lenders

Many dealerships have access to niche or subprime lenders. The dealer may be able to "bundle" a salvaged auto loan through their primary lender, and you can specifically ask if they can finance branded titles before making a purchase. The dealer may add fees or require a higher interest rate, but this can offer a convenient option. 

When you buy a salvaged or rebuilt vehicle from a dealer, you may find that the dealer does not even do a credit check to finance a vehicle, as loans are often based on the amount of the down payment and your income. However, you need to be cautious with this type of financial agreement, as there are often short loan terms and high interest rates. 

How to improve your chances of getting financing

No matter which option you choose for financing a vehicle, there are a few tips that can help you improve your chances of approval.

Get the car thoroughly inspected

An evaluation by an independent certified mechanic can greatly help demonstrate the quality of the vehicle, which can reassure a financial institution. If the vehicle is rebuilt, you will also need a state inspection certificate. 

Have complete documentation

You should also be able to provide the potential lender with complete documentation for the vehicle. This should include the initial reason for the classification as salvaged, such as insurance documents and an accident report. You should also have complete repair records with the appropriate receipts and, if possible, a clean CarFax or AutoCheck report. 

Proof of insurance willingness

As mentioned earlier, there may be challenges in obtaining insurance for a vehicle with a salvaged or rebuilt title, so proof of your willingness to insure can be very helpful in increasing your chances of financing approval. In fact, some lenders will only approve financing if there is confirmation that the vehicle can be insured. However, liability insurance may suffice for some lenders. So contact your insurer and find out if they can insure the vehicle, and obtain written confirmation that you can present to a potential lender. 

Build a strong credit profile

As with most financial decisions, the better your credit, the better your chances of approval. So focus on building a strong credit profile. You need to prove your ability to repay the loan, and you may need to consider a co-signer if your credit is less than ideal. If you have a credit score above 680, your chances of getting financing approval are better, so it may be worth spending some time improving your score before applying. 

Expert tips for financing salvaged & rebuilt titles

While we have covered the basics of financing a vehicle with a salvaged or rebuilt title, there are a few expert tips that may be helpful to you.

• Avoid flood-damaged vehicles: Try to avoid vehicles that have suffered flood damage, as they can hide very costly problems that may make lenders hesitant. You should only buy a vehicle that has suffered flood damage if it is fully documented and certified. 
• Work directly with specialized lenders: There are lenders who understand branded titles, so working directly with these specialists can save you time and avoid frustrations. 
• Get pre-approved for a personal loan: If bank financing is not possible, it is good to have pre-approval for a personal loan as a backup option. So make sure this is in order before exploring other options. The personal loan also gives you a good baseline for comparing prices, so you can get the best deal. 

Conclusion: Should you do it?

If you understand the risks, buying a vehicle with a salvaged or rebuilt title can be a cost-effective and savvy option, but it is crucial that you know the vehicle's history and have it inspected to verify all documentation. It may also increase your chances of financing approval if you obtain insurance for the vehicle and seek flexible lenders who will help you fully explore your financing options.