If you’re in the market for a used commercial truck, you probably noticed a pattern:
Two nearly identical trucks…
– Same year
– Same make and model
– Similar specs
But one has an “overhauled” or “rebuilt” engine and is thousands of dollars cheaper.
On paper, that sounds like a win: “The engine’s already been rebuilt, so I’m saving money and getting more life out of it.”
In reality, that “deal” can be exactly why many commercial lenders hesitate — or flat-out decline — these units. Let’s walk through why.
What an Overhauled Engine Really Means (and What It Doesn’t)
“In-frame overhaul,” “rebuild,” “major overhaul” — these terms all refer to serious engine work where major components (liners, pistons, bearings, gaskets, etc.) are replaced to extend the life of a high-mileage diesel engine. But — and this is critical — “overhauled” is not a regulated or standardized term; as Kelley Blue Book notes: “Rebuilds… depend on the caliber of the technician and the caliber of the components. Mixing used/cheap parts can shorten lifespan.”
Hence, it can mean either:
– A full, documented in-frame rebuild with high-quality parts, or
– A bare-minimum patch job just good enough to get the truck moving.
From a lender’s point of view, that ambiguity is a big problem
Before going further, if you’re navigating the used market at all, you may want to review our used truck financing guide to understand how lenders evaluate older or higher-mileage units.
Risk #1: You Don’t Really Know What Was Done
Unless you have detailed documentation (work order, parts list, shop name, mileage at overhaul, warranty terms), there’s no easy way to tell if the overhaul was:
– Done by a reputable facility with OEM or premium parts, or
– A quick “flip” job by a lesser shop just so the seller can list the truck as “overhauled” and push it out.
Ritchie Bros.reminds buyers that, “if you suspect the engine has already undergone an overhaul, check the truck’s maintenance records. … The maintenance record should give you a good idea of how well the truck was looked after.”
Lenders see exactly this risk you see – and worse: they’re on the line if the collateral collapses. That’s why having everything outlined in an equipment financing checklistcan make or break an approval.
Red flags lenders look for:
– No detailed invoices or paperwork for the overhaul
– Unknown or poorly documented shop
– Very high original mileage (e.g., approaching 900k – 1.2M) before overhaul
– Overhaul done shortly before sale (looks like a “flip”)
If nobody can guarantee what work was done (or the work was done poorly), an “overhauled engine” often becomes riskier than an original engine with strong, consistent service history.
Risk #2: Higher Chance of Breakdowns and Downtime
A truck is only worth anything for you (and to a lender) when it’s operating and generating revenue.
Cost studies in trucking confirm how major repairs hurt the bottom line: more downtime = fewer loads = less income.
An overhauled engine of unknown quality or workmanship can result in:
– Long shop time waiting on diagnosis, warranty approval, or corrective work
From a lender’s perspective, a truck that spends weeks in the shop is more likely to:
– Miss payments
– Lose value rapidly
– End up in repossession with little recovery value
That’s exactly what lenders and investors try to avoid.
Risk #3: Documentation & Maintenance History Are Harder to Prove
Commercial trucks must comply with federal inspection/repair/maintenance rules (e.g., Federal Motor Carrier Safety Administration’s Part 396). If a truck’s overhaul lacks clean documentation, it raises questions:
– Was other maintenance deferred (cooling system, emissions, driveline) while money went into the engine?
– Was this engine “rescued” after years of neglect rather than being proactively maintained?
– Are post-haul inspections and follow-up maintenance documented?
Lenders prefer trucks where you can see:
– A continuous maintenance log
– Regular inspections
– No mystery “major repair” with missing records
But a truck with major engine work done privately — or undocumented — would fail many of those checks.
Risk #4: Collateral Value is Less Predictable
When lenders approve financing, they’re heavily considering what the truck will be worth if they have to repossess and resell it.
An engine-overhauled truck can be tough to value because:
– Appraisers may discount it if the overhaul wasn’t from a certified facility
– Resale buyers may assume: “If it needed an engine overhaul once, what else is worn?”
– Despite the overhaul, the market may treat it like a “salvaged condition” truck
That means the lender may expect a higher risk of loss, and as a result they respond by:
– Lowering the loan amount (“we’ll only finance 60-70% LTV”)
– Higher interest rate or demand a larger down payment
– Shorter loan term (e.g., 24 months vs 36 or 48)
– Or simply declining to finance the truck altogether
Some buyers compare this to choosing between used vs new specialty trucks, and the same logic applies. Our used vs new tow truck guide shows exactly how small mechanical differences swing long-term costs.
Why Lenders Often Say “No” to Overhauled Engines
Putting it all together: lenders have policies that often restrict or refuse financing trucks with overhauled engines, especially when:
– The engine overhaul has been done recently and is not well-documented
– The truck has very high mileage or multiple prior major repairs
– The seller is a small dealer or private party with limited reputation
– There is no remaining OEM warranty or clear parts traceability
From the perspective, they’re stacking several risks:
– Mechanical risk – higher chance of major failure
– Documentation risk – maintenance risk/repair history incomplete
– Collateral risk – uncertain resale value
– Payment risk – more downtime leading to missed payments
So when you hear a lender say “we’d prefer a unit with an original engine and full records,” it’s not just preference, it’s risk mitigation.
How to Protect Yourself If You’re Considering an Overhauled Truck
If you’re still drawn to the lower price of a truck with an overhauled engine, here are steps to make it more appealing to you – and to a lender:
1. Get the paperwork
– Full repair order with VIN/engine serial and mileage at overhaul
– Detailed parts list (OEM vs aftermarket)
– Shop name, location, credentials
– Warranty terms and who backs it
2. Ask for supporting documentation
– Oil sample results, blow-by tests if available
– Post-overhaul inspection report
– Records of maintenance since the overhaul
3. Have a trusted diesel truck specialist inspect it
– Expect stricter lender guidelines, higher down payment or shorter term
– Understand some lenders may decline or only finance via special programs
The Bottom Line
An overhauled engine isn’t automatically bad — but it’s never automatically good either.
For many commercial operators, the “cheaper” truck with an overhauled engine ends up costing more in:
– Downtime
– Surprise repairs
– Missed loads
– Financing complications
Commercial lenders don’t dislike overhauled engines just to be difficult; they’ve seen enough deals go south when the truck underperforms or fails.
If you want the best shot at an approval and long-term profitability, focus on:
– Clean, verifiable maintenance records
– Transparent repair history
– Trucks whose condition you can verify – not just trucks with a “cheap” price tag and the word “overhauled” in the ad
Ready to take the next step?
If you’re unsure whether a specific unit would qualify, our team can walk you through what lenders look for in a used truck approval – give us a call at (805) 422-7342 or submit a quick contact form below and one of our specialists will reach out to you shortly.
Sources:
– Kelley Blue Book, “Should I Get a Rebuilt or Remanufactured Engine?”, [https://www.kbb.com/car-advice/should-i-get-a-rebuilt-or-remanufactured-engine/].
– Ritchie Bros., “Inspection tips: buying a used truck tractor,” [https://blog.rbauction.com/inspection-tips-buying-a-used-truck-tractor/].
July 5, 2024
by Augustine Sung