The Things You Must Know
Nowadays, there are many options to buy cars and they can all be purchased quickly. A Craigslist car might have you looking in the morning and driving it in the lunchtime. Then, in the afternoon, you can transfer the money to the seller. To help us navigate the mixed waters of car purchasing online and everywhere else, we are also told of the many “red flags” to look out for when buying pre-owned cars.
The seller may not have a valid title. The vehicle’s Certificate of Title (as its full name usually appears in documentation) is the key document that acts as proof of ownership of a vehicle. Almost every US state department of motor vehicle advises that buyers compare the names on the vehicle's title with the sellers. It is recommended that buyers not proceed if the seller cannot provide the correct name.
This seems fair to me. Do you think there are any valid reasons that a seller could not be able to transfer their title? You can still buy the vehicle without title. These questions we will be answering in today’s blog.
- What is a Vehicle’s Title
- What is the reason a seller might not have their title?
- What to do if there is no title
- Conclusion: Avoid, but Don’t Exclude
What is a Vehicle’s Title
To reiterate what we mentioned in the introduction, a vehicle’s title is the legal proof of the vehicle’s actual and legal owner. The title can be used to register your vehicle, transfer ownership to another person, or get new plates.
Clean, lien and salvage are the three most common title statuses. Securing a salvaged title by a seller can raise more suspicion than the sellers having an actual clean title. If the title is clean, it means that the car has been purchased and paid for. It also indicates that there have not been any accidents which could cause it to become uninsured.
Lien title status means that the current keeper of the vehicle isn’t yet technically the full owner because they haven’t finished paying for the vehicle. A bank, credit union, or another financial institution is the most common lienholder. Before they can sell, sellers must obtain a lien release notice.
The car has been declared salvaged by insurance companies after it was involved in an accident that caused the vehicle to be totaled. Someone has then restored the car and re-registered it, but it can’t come back with a clean title, so instead it gets “Salvage.”
The titles issued by each state DMV are unique and can look quite different. It will contain basic details about the vehicle and the name of its legal owner. As part of a title transfer procedure that takes place during the sale of a private vehicle, the seller will have the space to enter theirs as well as yours. To register your car, you would need to take the document along with your identification and pay to the DMV.
What is the reason a seller might not have their title?
Although many websites and sources warn you not to buy a car with no title, it is not a reason to instantly raise suspicion about the seller. You might have a case where the title has been lost and the seller is trying to hide the fact that you are about to get into a legal situation.
On the other hand, there are some very legitimate reasons as to why a buyer doesn’t have their title in hand, and you can still complete the transaction safely using some tried-and-tested methods. What reasonable reason could an owner of a vehicle have to not possess their title?
- No vehicle title was ever issued to the car because it was imported. Imported cars are prone to these problems. For example, Japanese Domestic Market (JDM), cars may not be equipped with titles or a VIN.
- It has been lost, stolen or damaged. The Certificate of Title is a single flimsy bit of paper and so it’s not inconceivable that such a document might get lost or damaged. One bit of spilled coffee, or the clamping of a dog’s jaw, or overzealous sorting and throwing out of old receipts could see the title damaged or lost.
In either case, there’s still some cause for suspicion because you have to wonder in the first case why no title was issued subsequently to the car’s importing. If the other case is true, then you need to ask why the seller did not take the necessary steps to get a replacement title. It can take some time to get a replacement — up to 90 days in some states when done by mail — but if the seller wanted to do everything right, then why not replace the title and do everything right?
RELATED: Safely Selling Your Car
What then should you do if you don't have a title for a vehicle? While we still believe it's okay to purchase a vehicle without a title in some cases, you should use the following to support your claim:
- Get a Vehicle History Report
- Make a bill of sale
- Purchase a replacement title
- Locate the Original Title
- Secure a Surety Title Bond
The next section will provide more details on these five methods.
What to do if there is no title
The five steps to take when you purchase a vehicle without a title were discussed above. Below, we’ll go into these in a bit more detail.
1. Get a Vehicle History Report
You can get a comprehensive vehicle report by turning to AutoCheck or Carfax. The cost for a Carfax report is $39.99 and an AutoCheck report $24.99. The reports cover all the essential information but have some differences. It is important to establish if the vehicle has ever been stolen. You can get this information from one of the reports.
You can also take the vehicle’s VIN number — that’s etched into the frame, so impossible for the owner to “misplace” — and run it through a check with the DMV. If you can’t get anywhere with the DMV due to confidentiality or other issues, then try putting the number through the National Insurance Crime Bureau To determine if the item has been taken.
If the above checks out that the car hasn’t been reported as stolen, then that’s a good sign to move forward. It’s especially alright if the seller also promises to get you the title in due course. You can still achieve this goal by using some of the other methods listed below.
RELATED: Carfax Vs. AutoCheck – Which Vehicle History Report is Better?
2. Prepare a bill of sale and pay with a traceable method
If there are no titles, the bill of sale can prove that vehicle has been sold with good faith. The bill of sale will contain both the buyer’s and seller’s names, as well as addresses, the sale price, the odometer reading, all the car information and more. You can also sign and notarize the bill of sale.
The other thing is to avoid paying in cash, even if it’s what the seller prefers. If there isn't a title to the property, you can use your leverage and insist on a check or bank draft. A sales agreement should be made between the buyer and seller. This will place the funds in an escrow account until you receive the title.
If you are offered a title by a buyer, and they claim that the title will be yours soon but it may take some time to get, equity can be created between you. Place the cash in escrow to show your readiness and ability to purchase it. After that, the seller will have to keep their side of the deal.
3. Purchase a replacement title
You can then simply change the title by using the DMV channel. The next step is to fill out a form and bring proof of residence and identification. After the vehicle has been registered and titled in the state where it was purchased, you can get a new title. When you go in person, it’s faster than mailing it, too, typically just a matter of days. Mailing can take several weeks. Things can go as planned once the new title arrives.
4. Locate the Original Title
If you know where the car was last registered — there’s a good chance it was out of state if the title has gone missing — you might be able to track down its current titled owner. In this situation, the current owners and their keeper didn't register or title the car. It is possible that they received the vehicle as a gift or didn't bother to file paperwork at all when purchasing it.
You can request information about the titled owner by contacting the DMV with your VIN if you know the address of the last place it was registered. You’ll likely have to explain the circumstances, but there’s no guarantee they’ll give you what you’re looking for. Most times it will work. If you have the name and contact information, then you can reach them to request a replacement title.
5. Secure a Surety Title Bond
One bond status we haven’t much talked about is the lien status. If there is no title in the seller’s hand, then you can’t know for sure whether or not it has been fully paid off. If there are any liens against the car they will be listed on the title. The seller and finance company own it legally.
Contact the DMV to check for liens and provide the VIN. If there are liens and the seller isn’t going to clear them, obtain a lien release letter and get their title back that way, then you should really walk away from the deal.
You can then move on to finding a Surety Bond provider if there aren't any liens. You can ask them about the requirements to create a Lost Title Bond. A bond is possible if the seller provides proof of purchase, proofs of residency and evidence that the vehicle has not been salvaged. A vehicle valuation is required. This will be used to determine the bond amount. It may not exceed twice its value. You pay a small percentage of the bond’s value as a fee, and are then covered against any financial penalties that were to come your way in the event that the sale was not kosher.
Conclusion: Avoid, but Don’t Exclude
In the end, it’s still better to avoid car sales that don’t come with a title in the seller’s hand, but really that’s just to steer clear of risk and bureaucratic burden that comes your way as a result of such a transaction. It’s understandable, however, when the car model is exactly what you want, and the price is right, that you might not be afraid to go the extra mile to get the car you want.
Follow the steps we have laid out above, and you’ll have done everything you can to make it work, and to protect yourself from the bad behavior of unsavory sellers. Pay attention to how the sellers react when you take these steps. You should be wary of sellers who seem rushed, anxious, nervous, or reluctant to share their information. This is a red flag. The sale will run smoothly if they are careful.
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