Identifying a Subsequent Asset HolderFirst thing to do is see if there’s a subsequent asset holder meaning that was that lender bought out did they sell their assets to another lender sometimes you can find that online even news articles that say XYZ bank was sold to a BC bank.
Checking for Statutory ReleaseThere may be a statutory release meaning that if the loan was originated more than five or seven or ten years ago by statute that lien is released and you can get that from the DMV.
Using Title Transfer to Erase LienIn some cases the document of title transferred to you will help erase that lien if you can show that the vehicles transfer to you and you can document that the lender or that the seller paid off their loan or if they have receipts that may be something which shows that the loan has been paid and they’re both there therefore that the lender has to give you a lien release.
Obtaining a Court OrderIf they don’t you can get a court order to erase that Lane and then get a clear title in your name.
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Understanding “Out of Trust” in Auto DealershipsWhat does it mean when they say that an auto dealer is out of trust on their floor plan? Well, a floor plan is a credit line that a dealership will have for their inventory. Look, if you’re a dealership and you have 200 cars and they’re an average of $30,000 apiece, that’s six million dollars worth of cars, and most dealerships don’t have or don’t want to put six million dollars of their money sitting on their front lot.
How Floor Plans WorkSo what they do is they get a line of credit from a bank. When cars come in—you see the big truck pull up in front of the dealership—every time a car rolls off that truck, the amount for that car is paid from the dealership to the manufacturer on that credit line. The bank just wire transfers the money to Ford or Toyota, whoever it is. The dealership now has it on their credit line. When they sell the car, they’re supposed to pay it off that credit line.
Handling Car TitlesNow, some lenders will hold the titles for those cars until it’s paid off. Some lenders trust the dealership to hold the titles, and when they sell it, they use it to register the car for the buyer. When a dealership does not pay off the car as soon as it’s sold, that violates that trust they have with the bank. That’s what’s called out of trust.
Consequences of Being “Out of Trust”So what happens is a dealership, if they need some spending money or if they’re low on cash or if their cash flow is tight, they’ll sell five or six cars in a weekend. That might be, let’s say, $150,000-$200,000 worth of inventory. They’ll keep that money and not pay off the cars right away. That gives them some float; hopefully, they think that later on, they’ll have that money. But what happens is it becomes a domino effect. The more they borrow, the more they’re out of trust.
Discovery and AuditsEventually, the lender will discover that their inventory’s not being paid off. They’ll come in, audit the store, find out that they’re out of trust, and either shut the dealership down or put them on curtailment, which means that they can’t hold the titles and they have to pay off some of this money.
Dealing with Out of Trust SalesThe reason I’m saying this: if you have a vehicle where the dealership sold it to you and they were out of trust and never had the title from the lender, that’s something you need to deal with. The dealership and sometimes even DMV and law enforcement need to ensure that your claims are handled. Most states have a victim fund that all dealerships pay into that can satisfy the claims from people who have vehicles that are out of trust.
Car Taxes and Title Transfers Very frequently, the question comes up about car taxes and what taxes have to be paid on a car to get a title if the vehicle is being transferred to another person. That’s typically a trigger for taxes due when it is appropriate in that state, and it sometimes depends on whether it’s a private sale or a dealer sale whether or not taxes are due. Sometimes it also depends on whether it’s a new or used vehicle.
Annual Property and Ad Valorem Taxes In some states, they also have a property tax or an ad valorem tax which is due every year for ownership of that vehicle. Be aware that in many cases, the sales tax that you’re aware of in a property transfer is actually a sales and use tax, meaning that not just the sale of the vehicle triggers it but any use of the vehicle.
Statutory Determinations One of the things that will make a determination of this is the statutes for that state and depending on whether it’s new or used or from a dealer. Be aware that the transfer of a vehicle, whether or not it’s done by changing title, is a triggering event.
Jumping or Skipping Titles So if you jump title or skip titles, there may be taxes due for each one of those transfers. And who’s liable for it? It might be the new owner, it might be prior owners; that’s between the different people involved in the car transaction. But a transfer of a vehicle, even if a new title wasn’t issued, might trigger sales tax being due by somebody. So if you’re jumping titles or skipping titles, understand that there may be a tax that comes back to haunt you for an unpaid tax down the road.
So over 20 years of processing car titles, we’ve seen quite a bit happen in the car title replacement service business. People that need lost titles really will do anything to get a title, and that includes allowing a third-party agent to do things it may not be 100% legal.
Changes in Laws and MarketsThere’s been laws that have changed, markets have changed, even the rules that the DMV’s have of handing out paperwork have changed. Some loopholes that existed before don’t exist anymore. There’s dozens of companies that have been shut down that are out of business.
Indianapolis CaseThere’s a case in Indianapolis where one company was using mechanic’s liens to get titles and there were dozens of people arrested. There were hundreds of vehicles that had their titles revoked because that illegal process was used.
Risks of Transferring Titles to Third PartiesSome services require that you transfer the car to them, you sign it over to them, they title it in their name, and then they sell it back to you. They may have a way to title in their name, but you don’t know if that process is legal. And if it is not legal, they own the car. So if they’re shut down or if there’s some claim against them for illegal operations at the moment that happens, they’re going to be the legal owner of your car. And if that is needed to pay for claims or pay for fines or pay for penalties, then your car might be used to satisfy them.
Observations of Illegal SchemesSo like I said, in 20 years of seeing car titles being processed, we’ve observed many, many illegal schemes in all states. Nevada had a couple company shut down, Indianapolis, there’s a few companies in Florida that do mechanic’s liens that no longer do that.
Advice for Car OwnersSo make sure that if you’re having somebody other than yourself process your car title, that you understand the process, that they’re willing to explain it to you in detail before you go ahead and give them your money.
Replacing Your Car Title in KentuckySo how do you replace your car title if it’s lost and get a duplicate in the state of Kentucky? Kentucky has an unusual portion of their law which requires any application to be acted on by the DMV within five business days. There’s no other state that I’m aware of that has a requirement in the statutes for such a quick turnaround.
Required Form and Application DetailsTheir form is called the TC 96-182. There’s a link to it at the bottom of this YouTube video. That form is required to be filled out by the applicant. If there’s a transfer, then sales tax has to be paid at the time of application. It’s possible that inspection of the vehicle might be required.
Fees and Processing TimeThe good news is there’s only a six dollar fee for that duplicate title. Remember, by law the agency has to act on it within five days. In fact, if you want a speed title, you can pay an extra 19 dollars for a total of 25, which means that they have to act on it within 48 hours to hand you a title.
Title Validity and ReactivationThe titles are good for as long as you own the vehicle. However, if there’s no activity on that title, no current registration after five years, the title will become archived and dormant. To reactivate it, there might be an additional fee to bring it back to life and have it be an active title again.
Key Points to RememberSo in Kentucky, there are a few unusual factors in getting titles. They have to turn it around quick, you do need to have sales tax paid if there’s a transfer, and most importantly, you have to have that document notarized to verify your identity before they issue a new title.
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