How checking the car title can help you make good buying decisions

 

Car titles are one of the basic parts of vehicle ownership, and knowing a little about them, and what details to look out for, will help you when it comes time to buy, sell or transfer ownership of a car.

Starting off with an explanation of what a car title is, this article tells you what information it contains, how it may affect your buying decision, how to transfer a title, and also covers different types of car titles you may come across. Whether you’re looking at the paper title while checking out a vehicle in person or viewing its details within an online vehicle history report, titles provide valuable information for your car-buying process.

What is a car title?

A car title is a document establishing the legal owner of a vehicle, whether a person or business, that’s typically issued by a state department of motor vehicles (DMV). It’s also referred to as a vehicle title, certificate of title or pink slip (as car titles in California were once that color).

Important information found on titles

Lender as lienholder, and the registered owner
In many cases, a buyer will use an auto loan to purchase a vehicle. If so, the lender will be listed on the car title as the lienholder; essentially the legal owner of the vehicle. The buyer will be listed as the registered owner along with their address. Once the buyer has repaid the loan, the lender will release the lien. The title and legal ownership are then transferred to the buyer.

If you’re buying a used car, consider checking to see if there’s an outstanding lien on the vehicle, as that would likely spell trouble. Purchasing a car with a lien may mean you’re obliged to pay off the balance on the loan or face the possibility of repossession.

Vehicle identification
Car titles also contain information to identify the vehicle and, while the exact details may vary by state, you’ll generally find at least the make, model, year of production and vehicle identification number (VIN). The gross vehicle weight, motive power (whether the vehicle is gas, diesel, electric or hybrid-powered), license plate number and the mileage of the car at the time of sale are typically listed, too.

It’s worth paying particular attention to the VIN and mileage when you’re buying a used vehicle. The VIN on the title should match the number found on the car, otherwise another warning sign has been raised because the vehicle isn’t what it seems on paper. Likewise, the mileage on the title should be less than the mileage you see on the car odometer. If not, the odometer reading may have been manipulated.

Transferring a title

On the back of a car title document is a declaration that, once signed, enables ownership of the vehicle to be transferred from one party to another. When the current owner has signed it, the buyer can apply for a new title with the DMV in their own name.

Different types of car title and what they mean

Salvage titles
If a vehicle has been severely damaged in an accident or has other significant problems, the insurance company may deem it a total loss. If that’s the case, the DMV will typically issue a “salvage certificate.” The car can’t be driven, sold as roadworthy or registered as it is, so the insurance company will often sell it for repair or parts. The process varies in different states but, if the vehicle is repaired and passes a state safety inspection, the state can issue a new title with a notation that the car has been salvaged or rebuilt.

According to Edmunds, there’s no definitive answer as to whether you should or shouldn’t buy a car with this “salvage title.” Pros may include a lower asking price than a clean-titled car, but cons include the risk of mechanical problems and potential challenges when reselling the vehicle. “It depends on how comfortable you are with buying a car that has a checkered past,” says the car research website.

Flood titles
A “flood title” means the car was damaged by sitting in water deep enough to fill the engine compartment. In the wake of storms, flood-damaged vehicles have been cleaned up and sold out of state without repairs, and potential buyers may not initially know such vehicles are damaged. The Federal Trade Commission (FTC) recommends what to do to find out if a vehicle is flood damaged, including getting a vehicle history report that includes the vehicle’s title status.

If you think someone is fraudulently selling a flood-damaged or salvaged vehicle, contact your auto insurance company, local law enforcement agency or the National Insurance Crime Bureau at (800) 835-6422, advises the commission.

Lemon law titles
Under state “lemon” laws, consumers have the right to a replacement vehicle or a refund from the manufacturer if their new car turns out to be faulty (often due to a warranty defect) and cannot be repaired after a certain number of attempts in a certain timeframe. Some of these “lemon buybacks” may subsequently be offered for resale. About 36 states and the District of Columbia require manufacturers and dealers to disclose that the vehicle now for sale was a buyback due to a defect, according to the FTC. In some states, that disclosure means branding the car title, known as a “lemon law title.”

Where to find quality cars with clean titles

If you’re in the market for a new or used car, consider working with a trusted lender like RoadLoans. RoadLoans is the direct-lending platform of Santander Consumer USA and maintains close relationships with a national network of reputable dealers. These dealers are able to show our customers select, high quality vehicles with clean and clear titles meeting our standards for age, mileage and financing.

You can apply for a car loan with RoadLoans online in minutes and get an instant decision. If approved, we’ll recommend a local dealer within your loan documents so you can shop for a car with confidence.

Want to buy a vehicle from an individual? We accept applications for private party auto loans, too. If you take this route, RoadLoans requires a vehicle inspection to ensure the car is approved for sale and meets our requirements.

Whether you buy from a dealership or from a private seller, all vehicles must come with clean titles and cannot have salvaged, lemon law, flood or frame-damage titles.

More information about buying a car with RoadLoans is available across our website, including details of our process and assistance with applying for a loan in different credit situations, including bad credit.* Visit the blog for topics like how auto loans work, how to lower APR, car loans for first-time buyers and the advantages of preapproved car loans.

 

* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by RoadLoans.com and Santander Consumer USA.

 

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