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I hear this all the time, with transmissions, rear ends, engines....
What exactly does rebuilding a component entail? How is it different that replacing with new parts? Also how do rebuilt parts hold up as compared to newer ones?
It all depends on the part in question and the level of the rebuild. Some items, like an engine can be rebuilt at different levels. For example, you can rebuilt an engine by only changing out the bearings, and reboring the cylinder walls and putting new pistons and piston rings on reusing the old rods and crank. Or you can put all new parts on and only resuse the block of the motor. I guess some would argue that one is a new engine and one is rebuilt, but from the engines perspective, the block was rebuilt.
Now, for differentials and transmissions, there are usually wear items that are simply replaced with new parts, the old parts that are resused are inspected for problems, and if they are good, they are reused.
If done right, a rebuilt part can be as good as a new part. All depends on the quality of parts they put put in.