What To Expect For Car Titles In 2025

Vehicle Titling in 2025
So what can you expect in the industry of vehicle titling for the year 2025? Obviously, with the new year, there are a lot of new rules and not a lot of new laws and also some industry transformations that we’ll be seeing in the coming year and years following. There are four major changes that will happen to the vehicle title process in the coming year. We’ll kind of talk about the four of them, and it’s going to affect you as a vehicle owner, as maybe an automotive professional, as a lender, as an auction. A lot of our clients are auctions.

Electronic Titles
The first one is going to be electronic titles. Electronic titles, so through our coalition called eART with many other title providers and some other third-party vendors like DocuSign, CarMax, and Manheim Auto Auctions, we are now pursuing a transformation with the different DMVs in different states to have them convert to electronic titling in all 50 states. Now, it’s a slow process, and it’s going to take a while to get there, but many states are already starting to implement technology.

Digital Signatures and Paperless Process
They’re starting to implement rules that allow for things like electronic digital signatures. Look, everything else you do in life, buy a house, sign a mortgage, you can do electronically, right? Use DocuSign e-signatures. DMVs don’t normally allow this right now; only one state really allows it, so we’re working on doing that. We’re also working on eliminating paper title documents. We’re looking at electronic documents. We’re working hard to get that done. So in 2025, we expect that many states are going to start adopting more and more of these rules and allowing people to have electronic titles and electronic records, which will make the process easier. You won’t get as much of a runaround, and you won’t have to wait as long for titles to come in the mail. You can get them almost instantaneously.

Montana LLC Loophole
The second big change for vehicle titles is going to be Montana LLCs. Remember, back years ago, there used to be the Vermont loophole. People did this Vermont loophole over and over to get titles from different states using the Vermont loophole, and that loophole, for many years, and we talked about it back starting five, six years ago, was really days are numbered, right? Because it’s not really the preferred way of getting a title, and the other states really didn’t like it because you weren’t going through the right process. Eventually, they put enough pressure on the federal government and Vermont to stop doing it, and the state of Vermont didn’t want to stop because they were getting a lot of money on sales tax.

The Montana LLC Loophole Explained
Well, now the loophole that some people are using is the Montana LLC loophole. What is that? Well, Montana does not charge sales tax when you buy a vehicle, so some people are using this process to buy a vehicle without having to pay sales tax by putting the car in a corporation name in Montana. Now, why a corporation name? Well, most states don’t allow you—almost all states don’t allow you—to get a title from that state unless you are a resident of the state. So you can’t just shop around and say, “Well, this state is easier or better for me to get a title. Let me just get a title from there.” It doesn’t work that way. You have to be a resident. But the way to work around it is you form a corporation in Montana, an LLC, you put the title in the name of the corporation, and you don’t pay tax. Well, technically, that’s not good because even though you registered it and titled it in Montana, you’re driving it in your state. So the tax isn’t just where you get the title; it’s where you use it, where you’re an owner.

Legal Issues with Montana LLCs
Whether or not that evades your taxes or not, that’s between you and your taxing authority and your revenue department. That’s more of a legal question than a title question. But you got to watch out because many states are recognizing that this Montana LLC is a way people are using to evade taxes or to avoid things like inspections or paperwork, right? And the states, you know, through our conversations with different states, they know that this is happening. They’re not stupid; they realize this is going on. There are all kinds of fly-by-night companies advertising, “Yeah, we’ll do this Montana thing for you,” and you know, you’re paying $500, $600 in fees to get a license plate from Montana.

Crackdown on Montana LLCs
A lot of people are doing it on higher-end vehicles like luxury vehicles or motorhomes when those could cost $100,000 to $200,000, and you could save $10,000 to $15,000 in sales tax. Now, there may be legitimate reasons to do it rather than just avoiding the sales tax, or you might say, “Well, I’m going to do that because I’d rather have a title there and still pay the tax in your state.” That’s fine, but that’s something that’s going to end pretty soon. You’re not going to see that being able to be done too much longer, and some states are starting to crack down. They’re sending out bulletins to law enforcement in the state, “Look, if you see a Montana license plate in our state, run the plate. If it’s an LLC, pull that car over to see if the driver is on the LLC,” because now that begs the question: Are they using the car in their state? Plus, check the insurance.

Insurance and Registration Issues with Montana LLCs
Because if you have a Montana LLC, the question is: Where is your car insurance policy from? If you have a Montana policy, but you’re driving it, let’s say, half the year or all the time in Virginia, let’s say you’re kind of misrepresenting to your insurance company where you’re using the car. On the other hand, if you get an insurance policy from Virginia and you have a Montana LLC, then it doesn’t match the registration. So that could be a problem. So if you’re going to look at that, we recommend getting legal advice from an attorney to make sure what you’re doing is not going to get you in trouble. Look, it may not, you may talk to an attorney and they say, “That’s fine,” but just make sure that you verify for yourself that what you’re going to be doing matches your personal needs and matches the laws in your state and matches what you’re trying to accomplish. It doesn’t get you into trouble accidentally.

Salvage Vehicles and Copart/IAA Auctions
Number three is salvage vehicles: Copart vehicles, IAA auction vehicles. Well, we’ve started this conversation many years ago, three or four years ago. Most of the vehicles now that are coming out of Copart and IAA are going to start to be more commonly designated as “parts only” vehicles, not salvage. Some states call it “certificate of destruction,” some states call it “non-repairable,” Texas calls it that. Some states call it “junk.” Right? The scary thing is some states don’t call it anything. They just don’t give you a title, and you may not know you’re getting one of these.

Insurance and the Parts-Only Designation
What does that mean? Well, if the vehicle has been designated “junk” or “parts only,” its VIN number is void. You can’t get a title, can’t get a registration; it’s a permanent cancellation of that vehicle as being eligible for any kind of on-road use. Can only use it for parts. A lot of people are buying these cars out of Copart, IAA, not knowing what they’re getting into, and they’re finding out later, “I can’t get a title.” And we’ve talked about this before, so this isn’t news. The news is more insurance companies are starting to use this instead of salvage titles. Why are they doing that?

Why Insurance Companies Favor Parts-Only Titles
Well, what they’re finding is they’re not getting that much less money for the car at the auction. They’re getting the same amount. Why is that? Well, most of the people who are buying cars at Copart or IAA are not buying them for the purpose of putting them back on the road, fixing them up, and selling them. Most of the people buying cars there are buying them to take them apart anyway. Even a salvage title. In fact, the only people really making big money on cars at Copart or IAA auction are the ones who are dismantlers.

The Economics of Buying Salvage Cars
You buy a salvage title car, it’s crashed in the front, and they take it apart. You can have a $5,000 engine, a $3,000 transmission, $2,000 airbags, maybe five or six of those, you have wheels, you have doors, you have computers. Gosh, there are four or five computers on a car, each one could be worth $1,000 bucks. By the time you add all that up, it could be more than what the car would be worth if you bought one from a dealership. Right? So you have the expense of dismantling it. More importantly, you have to have the expertise of knowing where to put all these parts, ship them to warehouses, put them at the right place, and advertise them.

Insurance Companies and Salvage Cars
But these parts companies already have that. They’re already doing that. So if you took the same car, let’s say a 2022 Toyota Camry, it’s crashed in the front, you buy it for half its book value or even a third of its book value. You might think, “Well, I’m stealing the car.” Well, by the time you buy all the parts, put the car back together, and go to sell it, you’re going to find a couple things. First of all, you’re not going to get that much for the car, because people who are in the market for used cars want a car that’s in good condition. You don’t get that much out of it. But by dismantling it, you’re now part of the supply chain that gets to sell these parts. And that’s why insurance companies have figured that out. They’re selling parts, they’re liquidating these vehicles, they are selling them off, and they’re moving them through auctions without much of an issue.

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