Rebuilt engines, frequently called overhauled engines, have been dismantled, inspected, cleaned, and their parts replaced or repaired to update them to current manufacturing specifications. Rebuilding an engine, while labor intensive, costs less than replacing an entire vehicle or a new engine. Due to the unique rebuilding process, some parts might be as old as the original, slightly used, or brand new, but many manufacturers will offer a warranty anyway. Choosing a rebuilt engine can extend the life of a car and might be a cost-effective option for drivers who know that they have serious engine trouble.

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Technically, engines that are rebuilt are different from those that have been overhauled. With rebuilt, or re-manufactured, engines, a mechanic will either save or fix parts based on the amount of wear or damage. The original manufacturer of the engine, whether from an automobile, is the only one authorized to re-manufacture it. Much specialized machining is done to ensure that every part works well. Overhauled engines, however, contain only a few replaced parts, at full cost, and rarely involve machining old parts. This can be less effective in extending the life of the vehicle.

Some of the machining done in the rebuilding process includes reforming the piston-cylinder system. The cylinder channels are re-bored and the pistons are fitted to match the larger cylinders. All bearings are smoothed and lubricated. The crankshaft or camshaft might be reground, heads resurfaced, and connecting rods machined and precisely gauged. Other less expensive parts, such as the timing belt, gaskets, and belts, could be replaced.

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Since rebuilt engines have different parts with different operating histories, they are not guaranteed to last as long as a new engine. A part that was fine when the engine was evaluated during the remanufacturing process may malfunction after the engine has been re-installed. The engine has been thoroughly inspected, however. When a mechanic rebuilds an engine, he or she may be able to find other, previously undiagnosed issues that can be fixed before they cause problems.

Another advantage is that the engine will meet the requirements for original equipment manufacturer (OEM) specifications. These might have changed since the engine was first produced, and their improvements might make it run smoother and more efficiently