Understanding Vehicle Financing and Short SalesSo, what is a car short sale and how does it compare to a voluntary repossession, a loan modification, or lean release? Well, a vehicle loan is a financing instrument that’s used to get a vehicle purchase funded when you don’t have all the money. So, if you’re buying a $40,000 car and you only have $3,000 in cash, you would get a loan for the difference. If later on it’s determined that you may have trouble paying for that loan or if you have difficulty covering the payments or if you owe more than it’s worth, you can do several things.
Available Options When Facing Payment DifficultiesYou can do a loan modification with your lender and we have an example on the screen of that. You can do a voluntary repossession, which is terrible because it ruins your credit. And you’re still going to owe the difference. So, let’s say if you bought that car for 40,000, you finance 40,000 and then two years later you want to do a voluntary repo. It might only be worth 20. You’re still going to owe probably 35 and you’re going to do the repo. They’re going to sell it for 20 and they’re going to send you a bill for the other 15,000. So, it’s not going to save you that much. They’re just going to hit your credit and they’re going to garnish your bank accounts.
Loan Modification and Car Short Sale AlternativesYou could also do a loan modification where you can contact a lean holder and maybe get them to adjust the terms. You can also request what’s called a car short sale. What this does is it’s a package of paperwork you can put together that shows what your current value is if it’s only $20,000, you can ask the lender, “Let me sell it for $20,000. Let me out from under this out of equity, negative equity, upside down, whatever you want to call it.” Sometimes they call it being underwater in the vehicle.
Short Sale Process and RequirementsAnd the lender will let you sell it for a fair value. You’re not going to sell it cheap. You’re not going to sell it to your cousin for, you know, 15,000. You’re going to have to sell it in the open market and to show all kind of documentation that you don’t have, you know, a million dollars sitting in the bank. You don’t make $200,000 a year. You’re going to have to prove that it’s a hardship.
Lender Policies and Potential OutcomesAnd what they may do, it’s up to the lender, is let you sell it to get out from under it. And then that negative equity, that balance, they may either wave part of it. They may let you make payments on it. They may defer it, they may convert it to a personal loan, unsecured loan based on the lender’s policy, but also based on how good of a package you submit to them. And this is an example from Ally Bank, one of the largest lean holders of what they do for loan modifications.
Lender Program Variations and DocumentationYou have a lot of options. Different lenders have different programs. They don’t always make them public. They don’t always make them conspicuous because they really don’t want a lot of people doing them because it costs them money. So, you may have to just submit a standard package of documents. And the link below will give you examples of those to request that your lender allow you to sell the vehicle to get out from under that payment where if you have too much negative equity, you can’t even trade it in because the dealership can’t absorb or digest that much negative equity on a vehicle when even when they’re selling you a new vehicle.
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Common Questions About Buying Vehicles Without TitlesONE of the most common questions we get is about buying a vehicle without a title. Obviously, if you already have a vehicle with no title, you want to proceed with title recovery and some of the methods that we talk about on our website in order to get a title for it. If you already have the vehicle, what about if you don’t have a vehicle and you’re looking to buy one and you’re not going to get a title when you buy it? Should you do that? Well, officially we don’t recommend purchasing a vehicle without a title.
Why We Don’t Recommend Buying Without a TitleHERE’S why. All of these methods for getting a title that you see on our website for title recovery, court order title, bonded title, VT transfer, prior and a contact, all the different methods that are available work most of the time. Sometimes though, there is something about the vehicle that would prevent you from ever getting a title.
Scenario 1: Stolen VehiclesFOR example, an obvious situation is if the vehicle is reported stolen, can’t get a title.
Scenario 2: Junk or Parts-Only VehiclesWHAT about other possible scenarios? What if the vehicle has been reported as a junk or parts only vehicle? Sometimes if a vehicle has been owned by an insurance company where they paid out a total loss claim, they have reported it to the federal government as a junk or a parts-only vehicle. Now, don’t think you can just look at the vehicle and see what kind of shape it’s in and know that it’s not a junk vehicle. Many times, these vehicles are completely in good condition, but the insurance company has reported as parts only because of liability purposes.
Scenario 3: Open LiensANOTHER scenario is if the vehicle has an open lean against it. Now, leans sometimes can be removed. There’s a process for doing that. You can see on our website at cartitles.com, there’s a lean release removal process. Usually that works. But if the person who borrowed the money for that vehicle has been actively deceiving the lender and it’s an active default, there may not be an easy way to remove the lean.
Scenario 4: Delinquent Taxes or RegistrationANOTHER scenario where a title could be impossible is if the vehicle has been delinquent on back taxes or on back registration. Some states, if their registration fees or taxes are not paid, paid on the vehicle will freeze that VIN number. they will freeze that title so that nobody can get a title for it.
The Risk of Buying Without a TitleSO, as you’re looking at buying a vehicle, you’re looking at buying something without a title, remember that there is some chance that you may never ever get a title.
Limitations of VIN ChecksAND you might say, “Well, gee, can I do a title search? Can I run a VIN check? Can I check the VIN?” Well, yes and no. All of these VIN checks that you see online, Carfax, VIN search, all these different online consumer searches don’t check for everything. Even if you look at their terms and conditions at the bottom of their site, it’ll tell you this isn’t a real 100% government VIN search. It’s a just a kind of a basic online database. Many times it doesn’t even show up if it’s stolen. It doesn’t show any leans. It might say it looked for leans, but most states don’t report leans outside of their DMV.
DMV LimitationsAND you might say, “Well, can I go to the DMV and check this?” Well, you might be able to go there, but you’d have to go in person with your photo ID. They won’t do it over the phone. They won’t do it by email. They don’t do it online, certainly. But here’s the other thing. The DMV probably only has records for their state. So, if there’s some record in another state which would prohibit you from getting a title, it’s not going to show up.
Due Diligence LimitationsSO, you can perform some due diligence in advance to try to see if maybe there’s something obvious that would prevent you from getting a title, but you’ll never be able to know 100% if the vehicle is eligible for a title before you buy it.
Official Recommendation and Risk WarningSO, officially, we don’t recommend purchasing a vehicle without a title. Obviously, if you have one already, you want to try to get a title. nothing you can do then. But if you want to go ahead with a purchase because you want to take the risk, remember that whatever you’re paying for the vehicle, even if it’s a great deal, is totally at risk until you get the title certificate from that government agency. And until that new title shows up in your name, you are at risk of losing all your money.
If you’ve delved into the intricacies of obtaining a title for your vehicle, you’ve likely come across the Vermont loophole, a method that involves registering your vehicle in Vermont and then transferring the registration to your home state. The allure of this approach lies in its perceived simplicity, but before you embark on this journey, it’s essential to understand the potential challenges and weigh the alternatives.
The Vermont loophole is no clandestine strategy; it has been widely discussed in articles, automotive publications, and even recognized by insurance companies like Hagerty. This popularity, however, comes with a caveat – all 50 states’ DMVs are well-aware of this loophole, and their responses can vary.
While many states have historically accepted Vermont registrations for title purposes, there’s no guarantee your state will do the same. DMV policies can change, and certain states may, at times, resist this approach. Instances of states temporarily rejecting Vermont registrations have occurred in the past, only to revert to acceptance after a period.
On any given day, your interaction with a DMV agent, the specific branch, or even the policies set by the state commissioner can influence the outcome of your attempt to use a Vermont registration. Some agents may accept it without issue, while others may scrutinize it more closely, potentially leading to rejection.
Utilizing the Vermont loophole comes with its costs. Vermont requires payment of sales tax based on the book value of your vehicle, not the purchase price. Additionally, you’ll need to pay their registration fees and wait for license plates and registration. Upon returning to your state, you’ll be required to pay your state’s fees, adding an extra layer of expenses.
Before opting for the Vermont loophole, it’s crucial to evaluate whether it’s truly the best route. Contrary to popular belief, the requirements for obtaining a title directly from your state may not be significantly more challenging. Often, the perception of one’s state DMV being difficult arises from unfamiliarity with other states’ procedures.
The Vermont loophole might seem like an ingenious workaround, but it’s not always the most practical choice. Exploring other options directly available in your state can often be faster, cheaper, and more straightforward. Don’t disregard these alternatives simply because they might appear more challenging initially.
An illustrative example involves a client attempting to title a kit car. The client considered the Vermont loophole to avoid inspection requirements in their state. However, the complexities of paying taxes in Vermont, potential requirements, and the ultimate need for inspection in their home state made the direct route a more viable option.
While the Vermont loophole remains a frequently used method, it’s not without its downsides. Before proceeding, consider other available options in your state and weigh the potential risks and costs associated with the Vermont approach. Ultimately, being well-informed and exploring all avenues will empower you to make the best decision for securing your vehicle’s title.
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