Insurance for Rebuilt Title Cars in Ontario

What are salvage titles?

A vehicle deemed salvage has been written off as a total loss or can be repaired or used for parts or scrap. In Ontario, the Mandatory Vehicle Branding Program outlines what can be accepted as salvage and whether it can be rebuilt and made safe for road use. These vehicles can be a cost-effective option for buyers looking for an affordable option, but they come with risks, such as potentially hidden damage or difficulty reselling.

Here are a few details about them:

• The severity of damage: The car has sustained significant damage, often exceeding a certain percentage of the car’s value (this percentage varies by province).
• Poor market value: Even if repaired, a salvage title car typically has a lower market value than a similar car with a clean title because of the vehicle history.
• Coverage issues: Some companies may refuse to offer coverage for salvage title cars, they may charge higher premiums, or you’ll need specialized high-risk insurance.
• Rebuilt title: If a car is successfully repaired and passes provincial inspections, its title may be changed to "rebuilt," allowing it to be legally driven despite indicating that it was previously a total loss.

What are rebuilt title cars?

A rebuilt title is issued to a car that previously held a salvage title, signifying that it was declared a total loss due to damage. After undergoing extensive repairs and restorations, the vehicle has been successfully brought back to a safe and working condition, making it roadworthy again.

This differs from a clean title, which is assigned to cars that have never been declared a total loss and have no history of significant damage. The "rebuilt" status on a car's title indicates that the vehicle has been thoroughly repaired and is now deemed safe for driving.

Are salvage title and rebuilt title vehicles the same?

Salvage title and rebuilt title vehicles are related but not the same. When a company declares a car a total loss due to severe damage from an accident, flood, fire, or theft, it receives a salvage title. This means the vehicle is considered unsafe, too expensive to repair, and not legally drivable.

On the other hand, a rebuilt title is given to a previously salvage-titled vehicle that has since been repaired and passed safety inspections. After thorough restoration, the car undergoes inspection by relevant authorities to ensure it meets safety standards. If it passes, the salvage title is changed to a rebuilt title, making the vehicle roadworthy and legal to drive.

The main difference is that salvage title vehicles are considered unfit for the road, while rebuilt title vehicles have been repaired and deemed safe.

Pros and cons of a salvage title vehicle

Purchasing a salvage title vehicle has both advantages and disadvantages. Here’s a breakdown of the pros and cons:

Pros of a salvage title vehicle

• Lower price: Salvage title cars are usually sold at significantly lower prices than comparable vehicles with clean titles. If you can afford the repairs, owning a car can be more affordable if you're on a tight budget.
• Opportunity for restoration: If you have the skills or access to affordable labour, a salvage title car can be a good project vehicle.
• Negotiation: Since these cars are more challenging to sell, you often have more leverage during negotiations when buying a used car, which can result in even more significant savings.
• Utilizing the parts: If you don’t plan on driving the car, they can be an affordable source of parts for a similar model. This can be especially beneficial when parts are rare or expensive.
• Customizability: Some buyers use salvage vehicles for customization projects, focusing on personalization or modifications, rather than resale value. If you have the skills or access to affordable labour, a salvage title car can be a good project vehicle, allowing you to save money on repairs by restoring it yourself.

Cons of a salvage title vehicle

• Hidden damages: The car may have underlying structural or mechanical issues that aren't immediately apparent. Repairs may have needed to be done to proper standards, especially if the car was rebuilt cheaply.
• Difficult to insure: Many insurance companies refuse coverage for salvage title vehicles, and some will only provide liability coverage. Even if they do offer coverage, it might come with higher premiums.
• Financing challenges: Banks and lenders usually hesitate to offer car loans for salvage title cars. Financing may be challenging, and interest rates might be higher if available.
• Potential safety concerns: A car in a serious accident may have compromised structural integrity, making it less safe than a clean-title vehicle. Some repairs may only partially restore the car to its original safety standards.
• Limited warranty: Most of these vehicles are sold as-is, with no warranty or guarantee. This means you assume all the risk for future repairs or problems.
• Registration issues: In some regions, registering a salvage can be more difficult or expensive. The car might need to pass safety inspections to be considered roadworthy again.

Does salvage title affect insurance in Ontario?

Having a salvage title can significantly impact auto insurance costs in Ontario. Insurers view it as a higher risk because the vehicle was declared a total loss from severe damage.

When insuring these types of cars, consider contacting specialized insurers. They may offer coverage at a higher cost and with lower limits than for a clean title vehicle. A detailed inspection and a rebuilt title can help convince insurers of the car's roadworthiness and increase the chances of getting more coverage. Here’s a closer look:

• Liability insurance: Many insurance companies only offer liability coverage for salvage title vehicles, meaning they cover damages to others but not repairs to your car.
• No additional coverage options: Even if the car has been repaired, many insurers may refuse to provide comprehensive or collision coverage, as the risk of further damage or total loss is higher. If you find an insurer willing to provide full coverage, you will likely face higher premiums.
• Total loss payouts: If a car gets into another accident, the insurer is more likely to declare it a total loss again, even for minor damage, due to the diminished value of the vehicle. This would result in a payout often much lower than for a clean title car.
• Inspections and proper documentation: Some providers require a detailed inspection before insuring a rebuilt salvage title vehicle. You must show that the car was repaired properly and meets safety standards.

How to get a salvage title cleared in Ontario

In Ontario, you cannot entirely "clear" a salvage title but convert it to a rebuilt title after repairing the vehicle. Start by restoring the vehicle to a roadworthy condition, ensuring all damage is fixed according to safety standards, and keeping detailed records of repairs, including receipts.

If a vehicle with a salvage brand is repaired, it must be inspected by an authorized technician and pass a structural inspection. Under Ontario's Mandatory Vehicle Branding program, a vehicle branded as salvage can be rebranded as rebuilt once it has been repaired.

• The owners must have photographs of the damaged vehicle, a detailed invoice showing significant components used for the rebuild, and additional documents.
• All salvage vehicle inspections require an insurance estimate unless the vehicle was previously branded as rebuilt in another jurisdiction.
• All rebuilt vehicles entering Ontario for registration will have their brand of “Rebuilt” downgraded to “Salvage.” To be registered for road use in Ontario, these vehicles will require a structural inspection from an authorized technician at a ministry-licensed Motor Vehicle Inspection Station to be registered for road use in Ontario.

The Ontario Ministry of Transportation may reject a salvage title clearance for reasons such as improper repairs making the vehicle unsafe, insufficient documentation, prior designation as not repairable, outstanding fines, missing documentation, and involvement in multiple accidents.

How does a rebuilt title vehicle affect insurance?

Insuring a rebuilt title car is possible, but it comes with important considerations. Not all companies offer coverage for these vehicles, requiring you to shop around and compare options.

Due to the higher risk associated with rebuilt cars, premiums are typically higher than those for cars with clean titles. The types of coverage available may also be limited; some insurers might only offer basic liability.

Before providing coverage, companies often require a detailed inspection of the rebuilt car to assess its condition and associated risks. You'll likely need to provide documentation of the repairs, including receipts and inspection reports. Provincial regulations regarding rebuilt title cars can vary, so be sure to understand the specific requirements in your area.

While insuring a rebuilt title car can be more challenging and expensive, it's achievable with thorough research and comparison of different insurers to find the best coverage options for your vehicle.

Salvage titles vehicle FAQs

Is it bad to buy a salvage title vehicle?

Knowing the risks when buying a salvage title vehicle is important. These include potential hidden damage, challenges in getting full insurance, and a lower resale value. It might save you money if you're good at fixing cars and can find affordable parts. Before you buy, check the vehicle thoroughly for safety and potential future problems that could cost more than you save at the start.

Is a salvage title car safe to buy?

A salvage title car can be safe if it's properly repaired and passes a rigorous inspection. However, hidden structural or mechanical damage could compromise safety. Always inspect it by a trusted mechanic to ensure it meets safety standards before buying.

Can you finance a car with a salvage title?

Getting financing for a salvage title car in Ontario is difficult because most banks and traditional lenders need to avoid it due to lower resale value and risk. Specialty lenders or private financing may offer car loans with higher interest rates.

Is a salvage title vehicle worth it?

Buying a salvage title vehicle could be a good deal for a skilled mechanic or someone willing to take on risk for a lower price. For the average buyer, the potential downsides often outweigh the initial savings. Always inspecting the vehicle by a trusted mechanic before making a purchase and checking local laws is essential.

Have questions about insuring a salvage or rebuilt title vehicle? Speak with our broker team to discuss your coverage options.