Today we’re going to answer five common questions about vehicle titles. The questions are: Do car titles expire? Second question is: What is an MSO or CO on a car title? Third question is: Should you carry your vehicle title in your car with you? And the last two will keep a secret.
Do Car Titles Expire?So first, does a car title expire? Well, a vehicle title is a legal certificate, a government document issued by a department in a state. For example, the Department of Motor Vehicles is the name of that agency in most states. Some states call it Department of Transportation or Secretary of State; different states have different phrases for it. They issue a title proving the ownership. It’s not like a registration which is renewed every year; it’s a one-time issuance. Now, if the title is lost, damaged, or stolen, you can have a duplicate title reissued, but the original title has no expiration date on the actual title. However, if there is no activity on a title for a certain period of time, meaning that the registration is lapsed and doesn’t renew itself, or there’s no transfer, or just no activity on that title record for either five, seven, or ten years (depends on the state; some states do it in different intervals, usually seven years), the title record will be purged from the system at the titling division. Now, that doesn’t mean that the title is expired; it just means that the record is no longer active. Sometimes that record can be reactivated or re-established, but the record usually goes into archives. The title itself does not have an expiration date.
What is an MSO or CO?Second question is: What is an MSO or CO on a vehicle? An MSO stands for Manufacturer’s Statement of Origin, or a CO is Certificate of Origin. Those are documents which look exactly like a title issued by the manufacturer. Guess what the word is? Writing the name when they first build a vehicle. So, when Ford builds a brand new Ford Mustang at the factory and they ship it to the dealer, there is no title for that vehicle yet. They will issue a Manufacturer Statement of Origin or Certificate of Origin that says Ford Motors built this vehicle, here’s the VIN number, here’s a description. It was sold to XYZ Ford dealership. Ford dealership now has that MSO or CO, called different things by different manufacturers. And when they sell the vehicle to a consumer, that MSO is given to the Department of Motor Vehicles along with a new title application in the name of the buyer, and that’s what creates the first title. So, MSO, the easy answer is, it’s like the birth certificate for vehicles before the title is issued.
Should You Carry Your Title in Your Vehicle?Third question is: Should you carry your title in your vehicle? The answer is no. There’s no reason to carry the title in the car. You don’t need it to prove ownership. Your registration is what you need if you’re stopped by law enforcement, or you have a speeding ticket, or you have an accident (God forbid). That’s what you need. Your title is needed to transfer ownership. If you sell the vehicle, if you trade it in, the title is what transfers ownership. So, you don’t want to have it in the vehicle because if somebody steals your vehicle, now they have the title too. If it’s in the glove compartment, they stole your car, now they not only have your car, but they have your title, which means they could forge your signature and transfer it, which is probably not what you want to have happen. So, where should you keep your title? Well, you want to keep it in a safe place. If you have a secure document location, like a safe or file cabinet, hopefully it’s fireproof and waterproof because if it gets damaged, the title’s no good. Put it in your house where you keep a lot of cash equal to the value of your car. If your car’s worth ten thousand, think, “Where would I put ten thousand dollars worth of cash?” Because that’s really what your title is worth—the value of the vehicle. Now, the difference with cash is you can replace your title, you can get a duplicate title, but it’s a pain in the neck to do so. You don’t want to lose it if possible. Also, a title, since it’s not used every year to renew like your registration, a lot of times it gets lost. So put it in a place where it’s less likely to get lost. If you have a file in your file cabinet for important documents, like your birth certificate, your insurance policy, your passport, put your vehicle title in that same area. Maybe put a different file folder with a different tab on it, but keep it where you keep your safe documents so it doesn’t get lost. A lot of times people will just throw it in a pile in their junk drawer with stuff, and then when they go to sell their car, they can’t find it. And there are reasons and circumstances where getting a duplicate might be difficult or impossible, so you don’t want to lose it if you can avoid it at all costs.
Can You Have a Car Loan in a Different Name Than the Title?Next question has to do with car loans. This question comes up a lot in our vehicle title division: Can you have a car loan in a different name than the title? And the short answer is no. The car loan is given to you using the vehicle as collateral. Usually, the car loan is to give you money to buy the car. So the bank is going to put a lien on the car title, guaranteeing they’re getting their money back. So if Joe Schmo’s name is on the title but Sally Smith wants to get a loan, the bank is going to have a hard time getting collateral of an asset in somebody else’s name. There may be some documents, power of attorney, some subrogation agreements that you could do to make that happen. Most banks don’t want to deal with the trouble. Most of the time, what you’re going to need to do is put both names on the title and have the loan in one of the names. So it’s very difficult, if not impossible, to have a name on a loan that’s not on the title, or at least one of the owners on the title. There are a few exceptions to that, but it’s not really what banks want to do, so you’re not going to find anybody that’s going to want to do that.
Can You File for a Lost Title If the Vehicle Is Not in Your Name?And the last question is: Can you file for a lost title if the vehicle is not in your name? And the short answer is no. When you file for a replacement duplicate title, only the person listed on the title record can sign and file for a lost title. And think about it—you don’t want anybody to file for a lost title unless they’re the owner, because otherwise anybody could file for a title for your vehicle and take the car away from you. So for your protection, and really, it’s the law, only the person listed on the actual title record can apply for a duplicate title, and that’s good practice for vehicle ownership security.
ConclusionSo those are a couple of common questions about vehicle titles. In the comments, leave examples of questions you have so we can put those on future videos, and put your comments or reaction to these questions so we get a sense for what type of things you deal with regarding vehicle titles.
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Today we’re going to look at the process, paperwork, and documents for applying for a motor vehicle title. We’re going to use an example from the state of New Jersey. In addition to looking at the process, we’re also going to compare that process from a consumer or civilian to a licensed dealership. And just give you a little sneak peek, advance notice. Here’s the document for a consumer, and here’s a document for a dealer. Look how much simpler the dealer application for title is, and the reason why is because dealers have some additional privileges and authority for titling that an individual may not have. But it’s important to know what the requirements are for obtaining a motor vehicle title and what can make the process easier. This little barcode in the lower right-hand corner gives you a hint of how you might be able to do some things with this form to make your process easier. So let’s take a look and see what methods or what suggestions you can use to make the process easier.
What is a Vehicle Title?First of all, what are we talking about with a vehicle title? Well, a vehicle title is a legal government document. It’s a certificate that declares the ownership of a motor vehicle. Here’s physically what one looks like. It’s a certificate with scroll work. It has watermarks. It’s got a lot of legal aspects and features, just like you might find on currency, driver’s license, or birth certificate, to prevent tampering, to prevent forgery, to prevent false documents being prepared. Because the existence of that title and the name of the person on that title is evidence of the ownership of the vehicle. So if you imagine the vehicle having a certain value, let’s say even a modest vehicle that’s worth eight thousand dollars, that title represents the ownership of that eight thousand dollar value. So in effect, a vehicle title is kind of like an eight thousand dollar bill. It’s a currency because it proves the ownership. Whoever has that title with their name on it is in effect benefited from the asset of the value of the vehicle. That being said, it gives you some insight into why the titling process is as formal and specific as it is. They don’t just hand out titles to somebody upon request. You have to have the right documentation.
The Title Application ProcessSo now that we understand what goes into a vehicle title, let’s take a look at what the process is for obtaining one. Here is the title application for the state of New Jersey, and it says very simply at the top, “Use this form to apply for a New Jersey title. The applicant, the person signing it, must be the owner, lienholder, and authorized representative. You submit this application and all supporting documents.” And that’s going to be important because just filling out this application by itself isn’t enough. You have to have supporting documents, and we’ll talk about that. And you can submit it in person or you can mail it in. All applicants and this documents must provide proper identification. So they need to know that the name of the person and that the identity is correct. They don’t want to be giving a title to somebody who doesn’t exist as a person or maybe is not eligible to have a title. In addition, the supporting documents must be original unless they are court documents. They can be certified copies.
Types of Title ApplicationsStep one, what type of title are we doing? Is it a first-time title, initial? Is it a duplicate, meaning that you had a title document and it was lost? Maybe it’s a replacement or corrected title, meaning there was some error or something wrong with the last title that you need to correct. And then if it’s a vessel, meaning a boat, you click this box. If you’re adding or removing a lien, there are designations for those actions too. So this first tells the DMV what you’re trying to do. Are you trying to get a new title, a replacement, duplicate, corrected, that kind of thing?
Vehicle IdentificationFirst section that is important is the identification of the vehicle. What car are we talking about, or boat in this side section. The most important thing is the VIN or vehicle identification number. That is the ultimate identity of a vehicle. It differentiates one 2018 Toyota Camry from another 2018 Toyota Camry. They will have different serial numbers or VIN numbers, and that’s the first thing. If you notice, the first piece of information that’s asked for is the VIN number. They don’t care about your name; the make, model, VIN number is the first thing they want to know, and that’s important. Now, every vehicle has a VIN or vehicle identification number. If it’s older than a 1981 vehicle, that VIN number could have any one of a number of different formats. However, in 1981 and newer, all vehicles were issued a standard 17-digit VIN. And that VIN not only had 17 digits but it was in a certain format. The first letter or character designated the country of origin: 1 for the U.S., 2 for Canada, 3 for Mexico, J for Japan, W for Germany, etc. The second digit is the manufacturer: G for General Motors, F for Ford, T for Toyota, H for Honda, etc. So by looking at a vehicle identification number, you can tell a lot about what vehicle it is just from the first one or two digits. So that number goes here. Below that, there’s a place for a license plate number if it has one. Then you’re going to have the year, make, model, color, weight if it’s a truck. We’ll zoom in a little bit on this. If it’s a correction, the correction needed goes here. Odometer information, this is important. Vehicle history is monitored in terms of the reading of the odometer. How many miles has that vehicle traveled? So at any transfer and other events as well, the odometer reading is captured, and that reading will go in this box.
Owner InformationStep three is, who’s the owner? Who do you want listed as the owner of the title? Could be you, could be a company. Put your name here, put your phone number there. If you have a driver’s license or a business number, that goes in the next box. You have address, city, state, and zip. If there are two owners, the co-owner will go here and their driver’s license number. The next two sections are for if you’re adding or removing a lien, and if you are adding a lien, you put the lienholder’s name, business address, phone number, city, state, zip. If the person who is preparing this is a representative of the owner, like the CEO of a company, an accountant, a bookkeeper, maybe an attorney, they will put their information here as a representative.
Duplicate TitlesOkay, the next section is for duplicate titles. This lists the required documentation you need. If it’s an individual, you will need a valid photo ID. You will need the New Jersey registration card and a lien release if there was a lien. It’s very important you have those things. In addition, if you’re mailing in this document, you have to put the address where you want the document mailed when it’s done. If you go in person, it’s not a problem; they can hand it to you. But if you’re mailing it in, you have to put the address where you want that title sent, and also the format: U.S. Mail, FedEx, UPS, how you want it sent.
Signing the ApplicationOnce you have all of this information filled into this form, you have to sign it. And if you notice, right above the signature, it says, “I certify the above statements are true,” and if they’re false, it’s a crime because they don’t want you putting false information on a legal title application. Now, if you remember, we’re talking about one particular state of New Jersey. Every state has a different titling division. In New Jersey, it’s called the Motor Vehicle Commission. Some states call it the Department of Motor Vehicles. Some states call it the Department of Transportation. The form and the document is going to be very, very similar from one state to another. It’ll have the same boxes; it might be jumbled around in a different order. And once you sign it and submit it, the titling division will process it, and they’re going to look at all the requirements to make sure they’re met. They have a section here where they’re going to put their own notes: NMVTIS checked, if you notice, is right here. That stands for National Motor Vehicle Title Information System, and that’s a federal database where the government can look up vehicles to make sure they’re not stolen, they don’t have any liens, they’re not a salvage, they don’t have parts only or junk designation, and they can put their other notes for the transaction here.
Instructions and FeesThe good thing about New Jersey, many states have this, is they have an attached page which has instructions. Step one, it tells you, this whole box are the instructions for that one little section. Step one, what you have to have. Duplicate titles are issued if the current New Jersey title has been lost or stolen. What that tells you is, if the last title was not from New Jersey, you cannot apply for a New Jersey title. Same thing in any state. If the last title came from elsewhere, you have to apply for a duplicate in that other state. Now, for a new state title, different story. In-state title transfers require only submission of the previous New Jersey title. But if you have an out-of-state title, there’s going to be more requirements, probably an inspection, maybe some other verifications. What’s the fee? In New Jersey, the title fee is $60. That’s at the high end of the range. Many states have title fees that are $5, $10, $15, $20, $25, not that much. New Jersey is at the higher end of the range. I think there’s only four states that have title fees above $50. They also have a fee of $25 if you’re adding a lien. What else do they tell you? The vehicle information must match your signed and executed title documents. Well, what does that mean? Well, if you’re applying for a new title on a vehicle, you can’t just use this form. You have to bring them the old title from the last owner that they signed on the back. If you don’t have that last owner title, you can’t apply for a new title because they don’t know that you are the proper owner. The rest of the information is instructions about the form. You must sign this application and provide proof of ownership. You have to have photo ID. Mail-in applications, it tells you where to send it. And for signatures, it says blue or black ink only. Can’t sign it in a red pen or magic marker. You have to use certain types of ink. So if you follow their instructions, you’ll get a title.
Dealer ApplicationsNow, at the beginning of the video, you remembered that we also compared it with a dealer application. Well, look what dealers have. There’s hardly anywhere near the number of blank spaces. They put the name of the dealership, an address, their motor vehicle dealer identification number. This is what makes it possible for a dealer to have a simpler form. They have a dealer number that they can enter into the form, which gives them some privilege and authority to do more of the titling process. The vehicle information, you still need make and model and VIN number. But compare that with on the other form: make, model, VIN number. For vehicle information, we’ll look at this form: VIN number, license plate, year, make, model, color, weight, body, axles, many more pieces of information because on a new vehicle that information can be determined from the VIN number. You notice they ask a lot of questions about EPA because many states have requirements for managing environmental and mileage ratings on vehicles. If it’s a luxury vehicle over a certain dollar amount, some states have a luxury tax that you have to pay, and that has to be determined. Other than that, you answer those questions yes or no. You put the sales price, you sign it, date it, they’re done. So as you can see, for a dealer, a licensed automotive retailer, the process is much simpler than it is for a civilian trying to get a title because the dealer has more licensed authority. They have bonds, they have training requirements to make sure that they’re doing the title the right way. If you’re an individual consumer, they have to double, triple check everything to make sure that it’s done properly because you may only do this once or twice in your life. The dealer probably does a hundred of these a month. So there’s some simplicity offered for the dealership that’s not afforded to an ordinary consumer.
ConclusionThis is a good example of one state’s title process. Your state will probably have a different form number than this. This form has a number; it’s R621. Every state has a different form number. Believe it or not, about half the states, their form is called MV1. It’s different for all the states, but it’s called MV1, Motor Vehicle 1, because the primary thing you do at the DMV is get a title. That’s what they’re there for. So hopefully, this overview gives you some insight into what goes into getting a title for a motor vehicle. We have additional videos on other documents for other states, but at least you have an understanding of what you’re up against when it comes time to deal with the DMV to get a vehicle title in your name.
So how can you get rid of your car if you don’t have a title? Many times a person is looking to sell their vehicle, trade it in, maybe put it on Craigslist or Facebook, and they don’t have their title document.
Title Document ExplanationThe title document is a paper certificate that goes along with the vehicle that shows the vehicle identity: the VIN number, year, make, model. But also, it lists who the owner is, and when you sell a vehicle, you’re supposed to give that title to the next owner, and you sign it to show that you actually transferred it. If you don’t have the title, it’s going to be very difficult to sell that vehicle. It’ll be impossible to trade it in because dealerships don’t take vehicles without a title.
Verifying OwnershipSo what do you do? Well, first you need to determine if that vehicle title record is already in your name. If this is a vehicle that is titled in your name, registered in your name, and you simply lost your title certificate, it’s a simple process of requesting a duplicate title certificate or lost title certificate from the governing body. Titles are issued by a state-level agency. It’s not a federal government document like a passport or, you know, some other federal level document.
State AgenciesMost states issue titles from an agency called the Department of Motor Vehicles, Department of Licensing, Department of Transportation. Every state has a different name, and you all know what it is. It’s the place you get your driver’s license, the place you get your license plates. So, if you had a title or that at least the record is listed with your name on it, you can simply apply to that agency to get a replacement title certificate, and they’ll print out a paper document. It’s a legal certificate, and then you can use that to transfer the vehicle.
Out-of-State TitlesNow, what happens if it’s more complicated than that? What if the last title was not in your name? What if it was in your name but maybe in a different state? Maybe you’ve moved, and the state where you live now is not where that title record is. So, suppose you lived in, let’s say, California, and you had a title to your vehicle in your name, and then you moved, let’s say, to Montana, and you never switched it over to Montana, and you lost that title. Well, you can’t go to the Montana Department of Motor Vehicles and ask them to give you a title because they have no record of you owning that vehicle. What you’re going to have to do is go back to the California DMV, and you can do it by mail. You don’t have to drive back to California to have them issue a replacement and mail it to you in Montana. And there’s forms for all these things. You have to fill out some forms, get it notarized, and send it in. Every state has a fee for doing this. Most states are between $5 and $10 and $15. Some states are a little more. And you also have to plan for the amount of time. If you’re looking to urgently sell your vehicle, this may take a few weeks depending on the backlog of the Department of Motor Vehicles.
Vehicle Not in Your NameNow, what if the vehicle is not in your name? Let’s say you bought the vehicle and never transferred the old title into your name. That’s a little more tricky because you’re not eligible to apply for a duplicate replacement title because you’re not the legal owner as far as the computers are concerned. So, what you have to do is you have to find a way to generate new ownership proof in your name.
Surety Bond TitlesMost states you can do it using what’s called a surety bond or a bonded title, where you provide evidence of why you think you’re the owner. If the name in the title record is John Smith and you’re not John Smith, how is the DMV going to know you own the vehicle? You’re asking them not only to give you a title, but when they give you a title, by definition, they also take away the title ownership from the last owner. That’s the bigger problem. That’s why it’s so hard to do. Giving you a title might be easy, but you’re asking them to take it away from somebody else in the process. Now, you know you’re the rightful owner, but the DMV doesn’t. They have to take your word for it, so you have to come up with some paperwork. That’s where that surety bond process comes in.
Alternative SolutionsAnd you can put some comments below about questions on how to do this. What about if it’s more complicated than that, or if your state doesn’t do surety bonds? Thirty-two of the 50 U.S. states do a version of a surety bond title, but the other states don’t. And even the states that do, sometimes you run into a problem with a surety bond. In that case, you can do what’s called a court-ordered title, and you basically use the court system to declare you to be the owner of the vehicle by court order, and then that court order is delivered to the DMV to issue a title.
ConclusionSo, hopefully, the reason you’re watching this video is because you’re asking the question, “How do I sell my car if I don’t have a title?” Hopefully, the answer is you just lost it and it was in your name, because if that’s the case, it’s easy. Well, let’s say it’s easier. You still have to deal with the DMV and wait a few weeks to get paperwork done, but it’s easier than the other options. If you could do a bonded title, that’s not quite too bad. But if you have to do a court order title, we’ve seen those cases take eight, nine, ten months for the court to process the paperwork. So, try to find that title if you had it and you lost it. I would recommend going back and tracing your steps to see where it went. If you purchased it from another person and it was in their name, maybe see if you can get them to get a duplicate title because that would be easier than you having to jump through hoops. Now, sometimes it’s hard to get somebody else to do something like this because they already sold the vehicle, they have your money, and they’re not going to want to drop everything to deal with the DMV. But it’s worth trying, it’s worth asking. Leave us your comments below, let us know what you think, and that’s the answer to the question: Can you sell a car without a title?
So when a vehicle is financed, where is the title? Who’s holding the title? This question comes up very frequently from clients in our car title division. What happens when a vehicle is financed is the owner of the vehicle, the driver, the borrower, they are listed as the owner on the physical title. The owner’s name is showing as the owner of the vehicle. However, there is a section on the title certificate that references the lien holder. So if you borrowed money, let’s say from Chase Bank to buy your vehicle, or Ford Motor Credit, the lien holder section will say the name of that lien holder printed on the title.
Role of the DMV in Title IssuanceSo when the DMV or titling division in your state prints that title, they’re going to put that name in the title record and print it on the title certificate. Now, in most states, when that title certificate is printed by the DMV, it’s mailed to the lien holder. The bank actually gets that physical paper document, that certificate, and they hold it in their files while the loan is being paid. The name of the owner will still show as the owner. Technically, if you are, you know, the owner of the car, driving the car, you are the vehicle owner. You have insurance on it, you have it registered in your name, it’s owned by you. But the lien holder has what’s called a security interest or a chattel interest in that vehicle, and that chattel interest is what is their collateral to make sure you pay the mortgage or the car loan. If you don’t pay it, they can come get the car. Now they own it.
Selling a Financed VehicleBut the record of that lien holder on the title also prevents you from doing something else, and that means selling it. You can’t sell the vehicle to another person with a lien on it because they are holding the title certificate with their name on it. Once you have paid the final payment on that loan, they then take that title from their records, sign it, stamp it paid, and they mail it to you. Now you’re holding it.
Owner Holding Title in Certain StatesNow, there are a few states which allow the driver, the owner, to hold on to that title certificate even so. It still has the name of the lien holder imprinted on the title, so you still can’t sell it because it shows that there’s a lien against that vehicle ownership. So the title in most cases is held by the actual financial institution.
Paperless TitlesThere’s a third scenario. Some states on later model vehicles, newer vehicles, are going to paperless titles. And what that means is there is no physical paper document issued and printed by the title division. There’s just an electronic record of that title. If you go to sell the vehicle, you can have a paper document printed if you want, but initially, they do not create that paper document. When that happens, then nobody’s holding the title. The lien is still recorded on the title record, the owner is still showing as you on the title record, but the paper document is not actually created.
Example of Electronic TitlesThis is an example of a title. This is how a title looks for a vehicle when a vehicle is held under a non-paper title, electronic title state. That record is simply held by the DMV. Nobody gets a title. Once the lien is paid off, the financial institution will electronically clear that record from the title records at the DMV. At that point, you as the owner can print a paper title if you want. You can continue just to own it with a registration or transfer it to somebody else, or even if you trade it into a dealership, the dealership can look up that electronic title record and know that you’re the owner with no lien.
Leasing a VehicleThere’s actually another scenario for the title of a vehicle if it’s leased. If you lease a vehicle, there’s another option. Now, we’re going to get back in a minute to lien holders and charge-offs and write-offs, how that works if the lien goes into default and if the lender doesn’t pick up the vehicle, what happens. But first, on a lease, you’ll find that on a vehicle that’s not financed by a bank but leased to you, now it’s going to be different. The owner is going to show the lease company as the owner. You’re not listed as the owner. You’ll be listed as a registrant. The license plate and registration will be in your name, but the title owner is the name of the leasing company, Taylor Motor Credit, whoever. In that case, the lease company will hold the title, or if it’s electronic, it won’t be issued at all. And once you pay the end of the lease, the car goes back to the leaseholder and you will never see the title. If you decide at the end of the lease to exercise your purchase option to buy the vehicle at the end of the lease, now the title is transferred from the lease company to you as the owner, and it will be like any other title transfer. Just like you bought a car from Facebook, it’ll have a signed transfer from the lease company to you.
Charge-Offs and Write-OffsWell, if any type of loan goes into default and it’s not paid, many times the lien holder, the financial institution, the bank, whoever it is, will put it into collections. And after some period of time, they’ll stop really trying to collect it. They won’t spend any money trying to chase you around anymore, and they’ll do what’s called a charge-off or write-off. A charge-off of a loan, an auto loan, or any other type of loan is simply a designation from the lender financial institution that they no longer expect to get any money from this loan. It’s strictly a financial record, has nothing to do with the title. It’s a charge-off. And what that means is that when they do their balance sheet and asset disclosures to the federal government or for the taxes, they have to say that this loan is no longer an asset. We can’t count this loan on our books as something valuable to us. It doesn’t mean anything. Somebody owes us $7,500 on this car loan. We used to be able to put that $7,500 as an asset on our books like this money’s coming to us. As soon as it’s a charge-off, they have to say, no, we’re never going to get this money. So they can’t use it as an asset for financing, for their balance sheet, for any other purpose.
Impact of Charge-Off on TitleHowever, that charge-off event does not remove the loan record from the title. It does not take the lien out of the DMV records. If there’s a lien on the title document, if there’s a lien in the DMV records, it’s still going to be there after a charge-off. Now, if a vehicle is charged off, there may be an easier way to have it removed by requesting a lien release from the lender. That’s a different story. But up until that point, the lender or lien holder is still holding the title and have possession of that title certificate. Even if somehow you got your hands on it, it would still show that lien holder as having a beneficial interest or a security interest in that vehicle, which means you can’t sell it. Sometimes you can’t even renew the registration if you don’t have the title. So the lien and the title are two different things. The lien being charged off or write off does not remove it from the title record. In the meantime, the title certificate, that paper document, will be held by the financial institution until such time as that last payment is made.
So what are the pros and cons of the Vermont loophole for car titles and how does it compare with other methods like a bonded title or court order title or prior owner contact?
Vermont Loophole ProcessLet’s start with the Vermont loophole process. This is something that you’ve seen in hundreds of videos, hundreds of articles. Jalopnik, Hagerty Insurance—they’ve all featured it, and basically this is how it goes: If you have a vehicle you’ve purchased and didn’t get a title when you bought it and you went to your state DMV with a bill of sale or receipt or with no paperwork and said, “I want a title,” they basically threw you out and said, “We don’t give titles unless you have the old title.” That’s what you’re supposed to have—the last title for the vehicle. If you don’t have it, they’re not going to give you a new title. So you go back home, try to figure out what you’re going to do next, and you come across this Vermont loophole that you see or read about.
How the Vermont Loophole WorksThe way it works is you apply through the mail to the state of Vermont with your bill of sale to get a registration for your vehicle. You’re not getting a title; you’re getting a registration. Once you get that registration, you can then use it as your proof of ownership, similar to a title, to apply to your state to get a title. Because what you want to end up with is one of these—you don’t want just a receipt or bill of sale because without an actual legal title certificate, you can’t do anything with that car or truck or motorcycle. You can’t sell it, you can’t register it, sometimes you can’t even get insurance on it, although some insurance agents will sell you insurance on anything if you give them enough money. So the Vermont loophole comes in handy.
Downsides of the Vermont LoopholeWhat are the downsides? Well, the biggest one that most people find out quickly is the cost. You will have to pay sales tax on your vehicle based on the full book value of the vehicle—not what you paid for it, not what your bill of sale says, not what you think it’s worth, what the book value is. Now, there are some different little tricks you can use with different book values to maybe mitigate that a little bit and lower the cost, but it’s not going to be based on a hundred dollars like your bill of sale says. How much is the sales tax going to be? Well, if the book value says your car is worth seven thousand dollars, the Vermont DMV is gonna charge you six percent sales tax on seven thousand. That’s gonna be four hundred something dollars in tax, plus their registration fee is another $76 for a car, $48 for motorcycles. Now you’re almost 500 bucks for fees. It might be worth it in some cases; many people want to do that, but you have to factor that in as a negative.
State Acceptance IssuesAnother factor is when you go to take that Vermont registration and bring it to your state. Look, it’s a valid ownership document, just like a title from another state is, and the statutes in almost every state say they have to accept that as an ownership document. But just because a DMV regulation says they’re supposed to, it doesn’t mean that the person at the window you happen to talk to is going to know that. They don’t see a piece of paper that says the word “title” on it; they see a registration, so they might say, “Well, you can’t get a title with this,” and you might have to go back and forth and get a run-around and show them their own laws. There’s a bulletin you can get from the state of Vermont that’ll give your state DMV some information about that this is valid like a title, but that might be a hassle for you.
State-Specific RejectionsSome states have even declared, “Well, we’re not going to accept this.” We heard last year that the state of Indiana put signs on their window of their DMV saying, “We’re not accepting Vermont DMV.” Well, when pressured on that and when they were confronted about it, they found they can’t just say that. The Vermont registration is a valid ownership, so they can’t say that even if they want to. But for hundreds of applicants, probably, they ran into problems, and any state can do that at any time. They could give you a hassle about that. You can probably fix the hassle, and there’s a lot of tricks that you can use to make it less likely. We covered those in prior videos. Prepare the paperwork the right way, include some documents with your application to your state, some certain special documents that’ll make them pass through. Also, do it by mail; don’t go in person. There are some things you can do to minimize that happening, and it’s pretty rare, but that’s another potential negative.
Vehicle Eligibility RestrictionsWhat’s another negative? Well, it only works on certain vehicles. Your vehicle has to be 15 years old or older. So, whatever year it is now, 2022 minus 15, 2007. So, if your vehicle is 2007 and older, this will work. If it’s 2008 and newer, you can’t do it; you can’t use the Vermont loophole. You have to do something else.
Excluded Vehicle TypesWhat about alternate vehicles? There are certain vehicles that aren’t even eligible to register in Vermont. Certain military vehicles, old Humvees, Japanese mini trucks—you can’t register in Vermont, so it won’t work. Also, a vehicle that’s not roadworthy. Now, they don’t require that you do an inspection; they’ll take your word for it. They’re on the honor system, but a lot of clients make the mistake of saying, “Wait a minute, my taxes are, you know, $422, my car is all in parts, so you shouldn’t charge me that much,” and they’ll send pictures of their vehicle or a letter explaining that their car is, you know, not ready for the road. At that point, it will get rejected by the Vermont DMV because they only register road-legal vehicles, so that’s another downside.
Alternatives to the Vermont LoopholeWe’ll get back to a few more downsides to the Vermont process momentarily, but what are your alternatives? Well, we’ll talk about two or maybe three alternatives that might be of interest, but they also have downsides, so you have to pick your poison, which one you like the most or hate the least.
Court-Ordered TitleOne of them is a court-ordered title. What this entails is you go to the court in the county where you reside and you file a court case against the vehicle to have a judge declare you to be the owner of the vehicle by court order. Once that judge gives you that court order, you bring it to the DMV, slap it on the counter, and they have to give you a title. Period. End of story. This will work in any state; this will work in any jurisdiction; it’ll work on any vehicle. Now, what are the downsides? Well, first of all, it takes a long time. You might have to go to court two or three times to get through this process. Might take you three or four months. It’s pretty cheap; you probably only have to spend 50 or 100 bucks on court filing fees, and it’s almost a guarantee. As long as your vehicle is not stolen or sketchy or you have liens on it, it’s going to work. That’s what the process is for. You’re probably going to have to face some bureaucracy of how to fill out the paperwork because they don’t give you any blank fill-in-the-blank type forms. You have to start with a blank sheet of paper and type up what’s called a complaint or petition, and you might need some guidance on doing that. You can check out our website for information on that, but once it gets in the court system, the rest of it they’ll tell you what to do. You might have to send out some notices; you might have to put an ad in the paper, but once it’s done, it’s done, and now you have a clean title based on a court order, so it works.
Bonded TitleWhat about a bonded title? Well, this is something that works in most parts of the country. There are 50 states; I believe 38 of them do bonded titles in some form or fashion. What you do is you get a surety bond from a bonding agent, and instead of having the prior title, you use that surety bond to convince the DMV to give you a new title. What are the pros and cons? Well, the advantages are it’s cheap. You don’t have to pay tax to Vermont, you don’t have to do the two-step process of going to Vermont and then waiting, going to your state. It’s all done in your state. Downsides are, if you buy a surety bond, it’s not going to cost that much. If the car is worth, you know, seven or eight thousand or less, the bond will probably cost you about a hundred bucks. The downside is if you’re looking to sell this car or flip it, it might be a problem. There are some buyers that don’t want to buy a title that says “bonded” on it. Now, that’s up to you to figure out what your buyer would want, or if you’re not selling the car, then don’t worry about it. If you’re going to trade the car into a dealership, some dealerships don’t want a bonded title. Now, the bonded title designation will only stay on that document for probably three years. Some states it’s five; some states it’s less, depending on what the value of the vehicle is. So check with your state and check with our website for which states even do this. So if you’re going to keep it for three years anyways, don’t worry about it. After three years, it falls off the title.
Liability and LiensAnother downside is you’re not totally off the hook for liability. If you’re not sure of the history of that vehicle, that maybe somebody really is looking for it or there’s maybe somebody that’s supposed to have it, if somebody comes forward and says, “Wait a minute, that’s my car,” then the bonding company will give them the car back or pay them their money, and you’ve got to pay back the bonding company. So if you bought a car that’s a barn find and maybe, you know, it was Grandpa Joe’s old car and he died three years ago and, you know, some cousin slipped it out of the garage and sold it to you, well, if there’s a family member that deserves that car, is entitled to that car with a will or some other document, you might run into a problem with the bonded title. Also, if there’s any liens on the car, forget about a bonded title. They won’t issue a bond for a car with a lien on it. So there’s pros and cons to that one as well.
Prior Owner ContactOne other method we’ll mention briefly is a prior owner contact. What you do is you prepare title transfer documents from the legal title owner to you. And by legal title owner, I mean whose name is in the title records. Now, you might not know that, but it could be researched. There is some title record for every vehicle. You might not have a title, you might not know about the title, but some DMV in some part of the country has a record of that title. It might even be 10 years old with a person’s name—Joe Schmoe is the owner of this vehicle. Now, it may have been sold five or six times and flipped and dipped and financed or whatever, but some DMV thinks that somebody owns that car. And if you can have that person sign certain documents, then you will be the owner of that car. The downside to that is, first of all, you have to research and investigate who that is, and it’s a difficult process for a civilian. As a licensed investigator, there are easier ways for us to do it, but for you to do it, you have to jump through a lot of hoops. You have to fill out a DPPA form and do some affidavits to get the name, and then it’s contacting that person in a way that makes them want to help you. Look, if you just call them up on the phone and say, “Hey, give me a title for that car,” they’re going to think you’re some kind of a scammer. They didn’t own that car for the last five years and, like, who are you calling me? And, like, you’re bothering them. So you don’t want to do it that way. You don’t want to Facebook stalk them, you don’t want to text message them. There’s a certain way to do it in writing with proper forms and documents and return envelopes. You’ll see more information about that on our website. But the advantage is it’s very cheap. If you can look that up and get the person to agree to help, it might only cost you twenty dollars for a replacement title. So that’s another option.
ConclusionI’m sure as you heard each one of these methods, there’s something about each one that you didn’t like. There’s something that’s inconvenient or annoying or a pain in the neck or “I don’t want to do this.” Probably is. But you got to pick one. The title is not going to magically show up on your desk if you don’t have the old title. So buckle down, read through them, see which one is the best one for you based on what you feel like doing, and go for it. Because the longer you wait without having a title, the more chances some of these loopholes go away. Some of the availability goes away. Some title records get deleted over time, and it could be harder to do this in the future than if you do it sooner. Look, all these things you can do yourself. There are companies out there charging five, six, seven hundred dollars to get you a title. You can do all this yourself with the proper education, proper instruction, proper knowledge, proper discipline. If you want to pay five or six hundred dollars to get a title, go ahead. But you can do it yourself with some research, and that’s what our website is for—to give you that research. So look at all your options. Vermont loophole is one of them, not the only one. See which one appeals to you the most and just start working on it. It may take some time; may take a few weeks, may take a month. But the sooner you start working on it, the sooner you’ll have one of these magic legal title documents in your hand. And that’s what you want. That’s the reason you’re trying to do all this, is to get you a title in your hand so you don’t have to worry about the ownership of the vehicle and having no way to go forward after you fix it up, restore it, get it ready for the road. Put your comments below; let us know what you think.
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