Do Dealers Sell Cars Without Titles?

Let’s say you purchase a vehicle from a car dealer, whether it be an online dealer or one with a car lot, and you finance it. However, you don’t finance it through the dealership itself. Instead, maybe you finance it through your credit union or another bank. Now, what happens if the dealer fails to provide a title? What if they don’t have a title because they bought it from an auction and never received one? There are many reasons why a dealer might not have a title, but they are not allowed to sell the car until they possess it. Nevertheless, dealers will often sell the vehicle to make an immediate profit, even if they don’t have the title. Consequently, you may find yourself in a bind. Despite this, does your financing remain valid?

Here’s what happens when you obtain financing from your bank or credit union. The bank or credit union gives the dealer the car’s cash value. For example, if you bought a $25,000 car and financed it through a credit union, your monthly payments might be $450. However, instead of paying the dealer over time, the bank writes them a check as if they had paid in cash. The dealer always receives the full cash value of the car immediately. As a result, your bank is now out $25,000 while you still owe them $450 a month. The bank doesn’t care what the money is for; it was a car loan, and they put out the money expecting to get their payments back. If you never receive a title, the bank is not going to take the loss. In fact, since the bank typically holds the title with a car loan, they may not release the money until they receive the title.

If the bank does not receive the title promptly, they may convert your auto loan into a personal loan. If you read the fine print of your loan contract, it will indicate that if the title is not received within a specified period, such as 60 or 90 days, the bank has the right to convert your auto loan into a personal loan. This can affect you in several ways. Firstly, the bank may raise your interest rate, as an auto loan is a secured loan and, therefore, less risky for the lender. Secondly, the bank may repossess your car. For instance, if your auto loan rate was 7%, but the bank doesn’t receive the title, they may convert the loan into a personal loan and raise the rate to 12%. As a result, your payment, which was $450, may now become $510. If the dealer does not provide the title, they could have liability for both you and the bank, and nobody will assume the liability on your behalf. Thus, ensuring that the dealer has the title before purchasing is crucial.

To protect yourself when buying a vehicle from a dealer and financing it, there are certain steps you can take. Firstly, you should ask the dealer to show you the title. The old title should not have their name on it or someone else’s name because they bought it from an auction or another dealer. It’s okay if the name is different as long as they can show you the actual original title, not a photocopy, digital copy, or something online. They don’t have to give you the title immediately, but they should show you that they have it in-house and in their possession. If they can’t provide the title, this puts you at risk of paying for something you won’t be able to use. Therefore, it’s essential to ensure that the dealer has the title before proceeding with the purchase.

We receive numerous calls from people who purchased a car six months, eight months, or even a year ago and still don’t have the title. Consequently, they cannot legally drive their car because the registration is invalid and their temporary paper plates have expired. As a result, they are constantly pulled over and must park their car. They either paid cash out of pocket or are making high payments for a car they can’t even use. Therefore, it’s crucial to verify that your dealer has possession of the title before signing the contract or handing over your hard-earned money. Don’t take any chances, and ensure that you have a title in hand before making any payments.

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