Salvaged Vehicle

Why Is Rebuilt Car Insurance So Expensive? 

Auto Insurance Blog Published on 01 Jun 2021

Why is rebuilt car insurance so expensive? 

     I have several times been asked about the advantages of buying an auto that has been in an accident and shows an accident in a Carfax report. This thought is commonly overlooked by consumers of salvaged vehicles until the time to purchase an insurance policy for these types of vehicles.

     Millions of dollars have been spent by the insurance companies for vehicles that eventually cause property damages and fatal accidents. This information is important to consider when you are making a decision to protect your family through insurance and you want to give them the best protection.

     Many used car buyers shop for the lowest prices in the market before purchasing. Used car sales was discovered to be a great business, but the ones that tend to profit most are the rebuilders, those who are buying damaged vehicles and then rebuild them and sell them for a profit. Once it is approved by the state authorities it can receive a Rebuilt or Salvaged title.

    Today we are going to consider the advantages and disadvantages of buying a used car with an accident in its history. From the point of view of the insurance companies any rebuilt car will be considered a "lemon" and therefore a high risk to insure. After a buyer has spent much time trying to save money, the advantage will always be to the seller of the rebuilt vehicle because of the higher profit he will make. When these factors are not considered people could think the purchase is a "good deal". Hopefully the buyer will purchase and drive the vehicle home and not break down in the process. Satisfied with the purchase and thinking it was a great buy, the buyer then proceeds to get auto insurance for the titling process and registration of the vehicle.

    When the search for insurance begins the rebuilt auto buyer will be frustrated in purchasing insurance due to very expensive policies . For this reason I have decided to write this blog. There are many factors that affect the price for auto coverage for the driver which includes:

  • Driving Records
  • Tickets
  • Accidents
  • Credit of the customer, etc..

    Unfortunately many people forget the part in which insurance companies evaluate the status of the vehicle. As mentioned above the vehicle could have been restored and looking like it was new. Unfortunately no one else can respond to the possible errors and lost bolts and nuts crucial for the integrity of the vehicle since it has lost the factory warranty with the accident. That responsibility lays entirely in the hands of the insurance company and could be very different than the opinion of the driver. The insurance companies are concerned about the status history of the vehicle:

  • If the vehicle has been in an accident, the price for insurance will increase.
  • Is the vehicle reliable and more importantly safe to be driven?
  • If the vehicle has been salvaged, insurance prices will increase.

     The reason behind these price increases is because the equipment used in the manufacture of the vehicle has been tested and engineered to specifications and conditions for the protection and safety of the public. The correct procedures and torque for bolts crucial to the proper and safe performance of the vehicle must be properly applied by the automotive industry so parts will not fail while the vehicle is in operation.

    The opposite is true when the vehicle is rebuilt. Even with the most professional rebuilders, vehicles are being rebuilt without the warranties provided by the manufacturer. Under these circumstances, important parts and instruments which have been precisely engineered could be compromised and not be known during the repairs. Safety features built into the vehicle could fail and cause an accident, bodily injury, or even death of the passengers. For example, kinked or forced brake lines, broken axles, or bearings could cause a serious accident.

    Even though a vehicle with a salvage or rebuilt title might save a few thousand dollars initially, the insurance will be considerably higher because of the higher risk of vehicle failure and the resulting liability to insurance companies. In summary, buying a vehicle that has never been in an accident, rebuilt, or salvaged will be less expensive in the long run due to the more favorable rating by the insurance company and the end result of lower insurance premiums. 

    The cost of insurance of a new or used car that is not rebuilt or Salvaged could be very inexpensive in comparison to the rebuilt vehicles. Many of the cases my agency has quoted has shown significant price increases for rebuilt vehicles even costing twice that of a new vehicle, more or less! That variation could symbolize a huge extra expense for the buyer at the end of the life or the possession of that vehicle.


An easy example:

Honda Accord 2018 salvaged

Cost:  $23,000

Full Coverage Insurance - 6 months $1,230 or $2,460 per year

Insurance for 5 Years x $2,460       $12,300  (+ $23,000 price of car)   Grand Total $35,300

Insurance for 10 Years x $2,460     $24,600  (+ $23,000 price of car)   Grand Total $47,600

Honda Accord 2021 New

Cost:  $34,000

Full Coverage Insurance  - 6 months $593 or $1,186 per year

Insurance for 5 years x $1,186     $ 5,930   (+ $34,000 price of car) Grand Total $39,930

Insurance for 10 years x $1,186    $11,860   (+ $34,000 price of car) Grand Total $45,860

   The cost of full coverage insurance in this example for a 2018 rebuilt Honda Accord is more than double than that for a 2021 new Honda Accord! ($1,230 versus $593).  The initial savings was $11,000 for the purchase of the vehicle, but after 5 years, the increased price of insurance erases $6,370 of that savings! After 10 years, all the savings have been lost! After 10 years, the price of insurance for the salvaged vehicle is actually more than the initial cost of the car, and the salvaged car with insurance is actually more expensive than buying the new car with insurance! Every year the losses will continue to increase!

   In summary, any savings gained by buying a salvaged or rebuilt car will be lost due to the outrageous price of insurance! The above example is for a driver with a good driving record.  If the driver has a poor record due to prior accidents and tickets, the cost of insurance can be even more outrageous! The Buyer can get a better value for a new vehicle with lower cost of insurance than to get a used, banged up salvaged vehicle restored. To ask questions is something natural in the process of learning. It is better to be well informed than to spend thousands of dollars for such a small value. If you have any questions about coverage for your vehicles, stay tuned and check our Prices at Start an insurance comparison now or contact us, our agents are available to respond to any questions and help you with the best insurance for your needs.

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