Title Jumping ExplainedWhat is title jumping and how is it a problem for you if you’ve purchased a vehicle or you’re trying to sell a vehicle? Well, a title jump is when a vehicle title is signed over and left blank on the back of the title or flip from one person to another without the first buyer getting a new title in their name.
Legal ConsequencesThere’s a really good article from hot cars about how it can be a serious criminal problem—fines, penalties, and imprisonment. There’s actually people that are in jail for doing title jumping. It’s called the jump title or float title, sometimes called a skip title.
The Illegality of Title JumpingYou buy the car and then sell it without putting it into your name. So first you get an open title, meaning that somebody signs the back it doesn’t fill in the buyer in almost every state. It’s actually a crime to sign a title without writing in the buyer’s name and it’s illegal highly legal in all 50 states according to this article.
Exceptions and Legal FrameworkThere’s a couple states that allow exceptions for it if there are certain conditions met, talks about here extenuating circumstances somebody’s died or there’s some other scenario but in most cases it’s illegal.
Reasons for ProhibitionThe reason for it is because the paper trail looks like the original owner just sold it to the last owner and all the people in between didn’t have any documentation the intermediate buyers were not recorded and that’s a problem because it doesn’t keep track of who owned the vehicle and it also evades taxes and fees.
Curb Stoning and Dealer’s LicensesAnother reason is that there’s some people that try to do what’s called curb stoning where they buy and sell vehicles without getting a dealer’s license so if you’re some person who wants to buy cars from auctions and um flip the car real quick before you put in your name that’s a way to be in a legal dealer.
How Titles WorkLet’s take a look how a title works and what a jump title would look like. Here is the back side of a typical vehicle title and how you would fill that in. First of all as a seller you put your name printed here you sign it there and have it notarized as the buyer you sign it saying you’re acknowledging that the vehicle is transferred to you.
Open Titles and RisksIf you do not sign it or put your name as a buyer this now becomes an open title so anybody could put their name there first of all there’s a risk that if somebody finds this title they can just write their name in and now the owner.
Confiscation and Legal ConsequencesHowever if a person wants to just flip a vehicle and have it signed over to them maybe they’re gonna resell it right away and they don’t have anything written here then they could jump the title or skip the title that creates an illegal act that could create title problems later we talked to a client earlier today actually who went to the dmv with a title that was an open title and the dmv confiscated the title and put a flag on the system that means now the owner who was listed on the front of the title has to come forward and sign some forms before the title be transferred and good luck with that if you’re the buyer getting that owner to come forward because they already have your money so let’s take a look at another example of a title reassignment to see how that might work here’s another example of a reverse side of a title that shows places for reassignment so first it says any.
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Preventing Unauthorized Vehicle TransfersDid you know that you can put a hold on a vehicle title to keep it from being transferred against your wishes or against your will in California? This is called a courtesy stop request. In some states, they have a different name for it like a title hold or hold request, or sometimes it’s called a stop title.
Process for Requesting a Courtesy StopThere’s a process for it that you need to go through, and it’s designed to prevent unauthorized transfers of your vehicle. Maybe your vehicle’s been impounded, maybe it’s been towed, and you want to make sure no one gets the title for your vehicle.
Filling out Form REG 500In California, this form, this courtesy stop request, it’s a one-page form, it’s called REG 500. You put in your requester name, address, the license plate VIN number, make and model, and you check the box saying “I request a vehicle license and title courtesy stop be placed on the vehicle for the following reasons,” and you type in whatever the reasons are.
Legal Considerations and ExtensionsYou may have to involve the courts. It says here, “Copy the complaint or petition for injunctive relief,” and we’ll talk about that here on this other form momentarily has to be attached to it if it applies. You can also request an extension or you can request removal. And then you sign it.
Sending the FormYou do not have to have it notarized, but you do have to swear that what you’re saying is true, put your license number, and you can print it, keep a copy, and send it to this particular address, attention courtesy stops.
ConclusionThis is the process for California. Again, every state has something similar. In other videos, we’ll talk specifically about other states, but the important thing is to understand this is for preventing an unauthorized transfer of your vehicle.
Ensuring Legal ProtectionIf you’re afraid that somebody might be looking to improperly take the title out of your name or to put in somebody else’s name or maybe add a lien to the vehicle, maybe you’re afraid that somebody is going to forge your signature on a title or to request a title for a vehicle that somehow is not in your possession.
DMV Stop and DurationThis courtesy stop request going to the DMV automatically stops the DMV from transferring title for 60 days. If you don’t have your injunction or a court order by then, you can get an extension as long as you have a file stamped copy. You’ll still need to officially serve the DMV with the complaint once that happens with the court if it’s a court issue, but you can use this as a method to protect your interest in a vehicle when there’s a risk or a threat or it’s vulnerable to being transferred out of your name or somebody slapping a lien on it or somebody selling it outside of your control.
Real-life ExampleWe had a client last month where the issue was that they were traveling, they were out of town, and their vehicle they left behind. They traveled by air and they got wind that somebody had moved their vehicle and maybe they had taken the title from their desk where they had it stored and they were wondering if somebody can assign forge their name and put the title in somebody else’s name. So that’s the reason they were interested in doing this courtesy stop request or a title hold to make sure that nobody either accidentally or maliciously was going to take their title and switch it over to another name or put a lien on it where they weren’t able to retain ownership of their vehicle.
Source and Legal AdviceThis particular information comes from the Sacramento Public Law Library. Again, there may be legal matters involved with this. One thing they do tell you is make sure you keep insurance on the vehicle. You do not want to let your insurance lapse or cancel it even if the vehicle is not in your possession because any damage you’re not going to get paid for if you don’t have insurance. Any liability that happens with the vehicle, you may want to have protection against with an insurance policy. So get good insurance advice, good legal advice, but there is a method if you’re worried about somebody messing with your title or doing something sketchy with your title that you can stop any title changes using this process.
Final CautionAgain, good legal advice and do this properly to ensure that your vehicle doesn’t end up in the wrong hands and that you cannot access your title records for a vehicle that you legally own.
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Electric Vehicles Are Gaining MomentumOkay, electric vehicles are coming on strong. New data from the automotive industry shows that 10 percent of new vehicles sold in 2022 were EVs. It’s a big deal. It’s getting to be more of a critical mass. When it’s one or two percent, that’s kind of a very slim margin, almost a rounding error for the car market. Now that you’re at 10, and presumably 2023 will be higher, electric vehicles are a significant portion of the new cars sold.
Implications for All DriversWhat does that mean for you? Even if you don’t have an electric vehicle, it’s going to change some of the automotive driving experiences and resources in the marketplace. For example, you might see more charging stations at gas stations. Shell Oil has bought up an EV charging company for 169 million. What does that tell you? They may be putting some of these charging stations at gas stations.
Preparing Your Home for EVsAnother thing you might want to do is anytime you’re upgrading something at your house that requires electrical, go ahead and put a charger in your garage. Even if you don’t have an electric vehicle, many times the cost of adding an EV charging circuit, a 220 circuit, is the labor. If you already have an electrician there, or if you’re already moving something around in your garage, adding that charging port, it’s really just a plug, is very minor. The cost of the hardware is very minimal. You can buy, you know, five or six feet of, you know, or number two wire. You can buy the little, um, plug, the 220 plug in a bracket for less than a hundred dollars. The hard part is the labor of hooking it up to your breaker box or your service box. If you have an electrician out already, if you have all the parts, you can even mount it on the wall, run the wire, just leave it dangling. You might be able to have that done cheap.
Future-Proofing Your PropertyAt some point, you’re going to need it, right? At some point, you’ll have an electric vehicle, or even if you sell your house before you buy one, the next buyer is going to have one. So having that there might be an advantage.
Planning for an EV FutureThe other thing you can do is start to look at your usage and your trips to see where are their charging stations. How many miles are you driving? What range do you need? Because electric vehicles are increasing dramatically. Look, 10 percent of the market is a big deal. And if you have a gasoline vehicle, or both of your vehicles are gasoline, starting to anticipate how electric vehicles are going to impact your life is an important thing to do. Because it might help you decide where you’re going to live, what activities you’re going to partake in, and even employment to make sure that it matches the EV future where gasoline vehicles are less common and even in the minority.
So how do you title and register a vehicle that you basically made in your garage, or it’s a replica or some custom car without having a prior vehicle base underneath it? Like if you take an old ’69 Camaro and redo it and customize it, even if you make it into a hot rod or a retro mod, you have a car with a VIN number that it started with. What if you start from scratch and you have no VIN number, no chassis?
Kit Car or Assembled Vehicle ProcessWell, in most states there’s a process called a kit car or an assembled vehicle, they call it in some states. California has a program called the SB100, and SB100 is a method for registering vehicles that are specially constructed cars. A lot of these are for the movie industry. We’ll talk about that momentarily, and some people make what they call a garage creation that now you want to bring on the road. It might be a replica of an old car, Shelby Cobras are very common, it might be like a Batmobile, something totally custom, or some other type of vehicle, maybe a race car.
SB100 Limitations and ApplicationThe problem with California is they only give out 500 of these per year, that’s a limit. A lot of these are pre-allocated to the movie industry because they have to build cars to use in movies that are customized. So some of them go to the movie industry, and you’re not going to find this over the counter at the DMV. You have to do this through the main branch in Sacramento because some of the people at DMV have never heard of this. You can get these vouchers anytime during the year if they’re available.
Steps in the Registration ProcessIf they’re available, you have to go through a few step process. First, you have to get the paperwork from the DMV; they have all the paperwork. Make sure you keep all of your invoices so that they know how the car was built. They’re going to charge you tax on it. You’re going to have to have paperwork required throughout the build process. Then you’re going to have to get the California Highway Patrol to inspect the vehicle. They’re looking for stolen parts; they’re going to make sure there’s no parts on it that have VIN numbers from other vehicles that are stolen.
Vehicle Inspection and VIN AssignmentSo if you buy a door from another car, make sure it’s not a stolen car because they’re going to check that vehicle out. They’re also going to create a new VIN number, and they are going to be the ones that put it on the car. They’re not just going to hand you a metal tag and say do whatever you want with it; they want to put it on the car with tamperproof rivets. They don’t want you switching it to another car.
Mechanical and Performance InspectionsThen you’re going to have to get a mechanical inspection for lights and brakes to make sure that it’s safe for the road. And then they do what’s called a bar exam. This is a performance examination. They put the car on a dyno, but they also check things like carbon monoxide isn’t leaking into the car, things like gasoline isn’t leaking out of the fuel system. It’s a safety thing.
Rules and RestrictionsCalifornia talks about some of the rules on this too, where it’s not for resale. You can’t be a company that’s building these to resell. Obviously, at some point, if you decide to sell it, you can, but if you’re reselling it as a manufacturer, that’s not what they want to do. It’s not constructed by a licensed manufacturer. So, you’re a private person, and it does not include a vehicle which has been repaired by replacing parts, meaning that if you buy a vehicle that’s a salvage or a junk or a car that’s damaged and you just replace it with the same parts, that’s not what they want to do.
Smog and Verification RequirementsYou also have to go through smog, and you have to go through this vehicle verification process. You have to have a statement of construction that you complete, how you constructed the vehicle, primarily constructed by me, component part information, statement of facts. You have to go through this entire form and submit this properly to the DMV.
ConclusionNow, if you’re not in California, it doesn’t matter. This process is an example of what most states have for an assembled vehicle, kit car, maybe a race car that you want to put on the road. Every state has something similar; they call it different things. So if you have a vehicle that’s been literally constructed from scratch in your backyard from multiple parts and it’s not really a car that existed before and you just modified it, building it from the ground up, the SB100 kit car assembled vehicle is a way to have it be designated as a vehicle, and then you can go about getting a title.
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You’ve probably seen in the news where the automotive retailer Carvana is having all kinds of problems with its company. Their stock is down, there’s title problems, some states are canceling their dealer’s licenses, some states even the attorneys general are filing prosecutions for violations in those states. Today we’re going to talk about one specific problem that Carvana is having that affects consumers directly, and that is title problems. Why are they having title problems? What is behind it? Why does a licensed new car dealer have a problem with something as simple as a vehicle title? Don’t forget to put your comments below and questions that you have about this subject so we can interact with you and answer some of your questions and put them in future videos.
Carvana’s Title ProblemsSo here you have a large national automotive dealer chain, one of the largest in the country, selling cars to consumers and not giving them a legal title document. Why is that? Why would a legitimate large vehicle dealership not just give a title? How hard could it be? They paid the money, they signed all the paperwork, so why can’t the customer get their title for their car? They need the title. They have to present it to the DMV to get license plates to get ownership proof. What’s the problem with the title?
Reasons for Missing TitlesWell, there’s a couple reasons why a car dealership would not have a title. First of all, they’re not supposed to sell a car unless they have the title, but there’s a couple reasons why it might occur. First of all, worst-case scenario, the vehicle’s reported stolen. It’s a stolen car. Well, that’s not what’s going on with Carvana. It’s not stolen cars. Second reason is the title was somehow lost or damaged at the dealership after they bought it. Because you know, when the dealership buys a car, they normally get these cars from auctions. Auctions like Mannheim, Odessa, local auctions like Southern. They buy these vehicles and they get a title. Well, sometimes the dealership might lose it or it gets damaged. That’s a very rare event. It’s not something that would happen as frequently as what’s happening with Carvana. Even though they sell a lot of cars, they’re not going to lose that many title certificates. They’re not going to damage that many title certificates because a title is an actual paper document. It’s not electronic, it’s not online, it’s not crypto, it’s a paper form. They’re not losing the titles.
Administrative IssuesAnother reason why customers aren’t getting titles is maybe Carvana has the title, but they’re just not getting around to doing the paperwork. Maybe they’re understaffed. Maybe their title department is not handling the transfers properly. From all reports from the company itself, from the investigations that have been done, it doesn’t seem like that’s the problem. It doesn’t seem like they don’t know what they’re doing because it’s not really that hard. You don’t have to know that much about processing a title to figure out how to do it. In fact, individual consumers do it all the time. When you buy a car on Facebook or Craigslist or OfferUp, you transfer a title, you sign the back, hand it to the buyer, it’s done. It’s not that hard to figure out. It’s not a complicated part of selling vehicles. In fact, there’s dozens of YouTube videos, even on our channel, on many other channels, that tell you how to transfer a title. So it’s not like they don’t know what they’re doing. The time it takes to transfer a title isn’t a lot of time. It’s way less time than it takes to do the paperwork for the loan, do the paperwork with the customer. Look, they have a process in place to transport vehicles to a customer’s front door with a tow truck you’ve seen on commercials. So if they have a way to figure that out, it’s not like they don’t have the ability to have a title transfer department. That’s not the problem either.
Financial ConsiderationsWhat could be happening has to do with loans. And again, we have no evidence of this. We’re not accusing anybody of this, but this is one possible reason why Carvana is not transferring titles. It could be that they physically don’t have the title in their possession for a vehicle they bought. Why would that be? Well, just like consumers, large automotive retailers, Carvana being one of them, but even any other large dealership you drive by every day, the Ford store on the corner, the big Toyota dealership in town, CarMax, AutoNation, all the big automotive companies, or even small dealerships, they get loans on their cars, on their inventory. They get a loan from either their corporate financing bank. So if you’re a large dealership, you have a commercial loan from some local bank or maybe Chase or Bank of America, and that commercial loan helps you grow your business, fund your operations, and give you an inventory line of credit. That inventory line of credit is called a floor plan line of credit. Floor plan comes from showroom floor, right? The floor of your dealership has all your cars on it. Even some furniture stores have floor plans to finance all their inventory. If you add up the inventory in large automotive or large retailing companies, electronics, automotive, furniture, there’s a lot of money sitting there. In a car lot, there could be five, ten, fifteen million dollars worth of cars. Most dealerships don’t have that cash laying around, so they get a line of credit to finance these cars. Well, when you get that line of credit, the banks hold the title. You get that fifteen million dollar line of credit, the cars are sitting on your front lot. They let you have the cars, but they hold on to the title certificates until you pay for them, until you pay off that loan. So when you sell a car to a consumer, you get the money from that sale, you give it to the bank, they give you the title, and you give it to the customer. Well, what if you sell the car to that consumer and you don’t have, you need money, you’re short on cash. Maybe you don’t pay the bank loan off right away. The bank’s gonna hold that title. Maybe that’s why you don’t have the title to give to the customer.
Possible Loan IssuesDo we know that to be true? No, but this has happened before. There’s been many new car dealerships, big, huge high-end dealerships that have gone out of business because they got behind on their floor plan line of credits, called being out of trust. It happens every month. You read about a dealership that happens to you. You wouldn’t think that it would happen to somebody like Carvana, but if you have money problems, if you’re a big company, your money problems are bigger. Bigger company, bigger problems. There’s another financing arm that dealerships take advantage of, and that’s the auction credit department. When you buy cars from an auction, a lot of times the auction will say, “Look, you bought all these cars, you don’t have to pass right away. You bought ten cars today, they’re twenty-five thousand a piece. That’s two hundred fifty thousand, quarter million dollars in one day. Don’t worry about it, just take the cars, put them on your lot. When you sell them, give us the money.” Because auctions know that most dealerships sell their cars within fifteen, twenty, thirty days. Most dealerships have a thirty-day turn. If you have an inventory vehicle that’s more than forty-five days old, you got to get rid of it. That’s old inventory. It’s stale. You got to get rid of it. So most auctions figure, “Look, they’re good for it. They’re going to sell it. They’re not going anywhere, and they don’t have the title until they pay us. So we’re safe.” So the auction could be holding the title. Now again, if the dealership, whether it’s Carvana or anybody else, sells that car for let’s say thirty thousand to make a five thousand profit and decide, “Look, we’re short on payroll, we’re short on taxes, we don’t have enough money to run our operations. Let’s keep that thirty thousand, use it for some other things, and we’ll catch up with that sale later at the auction.” Is that happening? We don’t know, but this is one reason why titles might not be in possession of a dealership.
Complex Financial ScenariosWhat if it’s both? What if a dealership, generic dealership, and we won’t pick on Carvana, but what if a dealership buys a car from an auction and gets a float on their money? They finance it, they ship the car to the dealership. When it gets here, they call up their floor plan lender and says, “Hey, put this car in our credit line. Okay, we put it on for twenty-five thousand.” Now they have an extra twenty-five thousand plus a free car. Now they sell it to a customer for thirty thousand. They get that money. They have fifty-five thousand cash, and they haven’t come out of pocket yet for that vehicle. Could that happen? In theory, it could. It remains to be seen whether or not that’s what’s going on behind the scenes at a place like Carvana. It may not be. But for that many cars in many, many different states, for a large operator like Carvana to have title problems where there’s investigations and look, they’re willing to let their license be revoked by a state rather than fixing title problems. How bad does that have to be? If you’re a car dealership, your license is the only thing keeping you in business. If you don’t have a license, you’re out of business. And there are literally some locations for Carvana that have been revoked and yanked their licenses, and they’re shut down. So how bad does it have to be to let the licensing bureau yank your license? Wouldn’t you fix that unless you don’t have the money?
Permits and ComplianceThere are even some new Carvana locations that are in the process of being built. They’ve done site work, they bought the real estate, they’re starting to build that big vending machine tower. And because of the fact they’re not in compliance, their permits are getting pulled for their new location. So again, how bad does it have to be? Look, every company can maybe do something a little bit wrong or do something procedural or paperwork and get a violation or get a fine or maybe get a reprimand. But in order for a license to be revoked, it’s pretty serious. Most state licensing bureaus don’t pull your license unless it’s very, very serious, right? They give you a fine, they give you a write-up. You see it all the time in the newspaper, you know, restaurant gets a fine for, you know, maybe having, you know, leaving dirty dishes out. You may see, you know, an employer get a fine for not having the right kind of, you know, cones blocking, you know, construction workers, whatever. But you almost never see licenses get revoked. Carvana licenses are getting revoked, so that’s a pretty extreme event to have happen. The question is why?
Conclusion and SpeculationWe don’t know at this point. It’s not in the news yet. If there is a financing problem or a cash flow problem where these vehicles have loans on it, that will probably be the last thing anybody finds out about. That’ll be kind of like the, you know, the last piece of the onion that gets peeled back after everything else crashes. You know, as of today, their stock is down about thirty bucks. At one point it was three hundred fifty, three hundred sixty. It’s a ninety percent discount. There are the license revocations. That’s in the news. There are fines. That’s in the news. If it’s something as serious, if it’s something as serious, remember I said if, as this financing issue, that’s going to be the last thing that Carvana wants out there. Because that implies things like securities violations, stock manipulation, false reporting. And again, if that’s what they’re doing, which again, we have no reason to think that it is, that will be one of the last things that comes out. But at this point, we don’t know why there’s title problems. It’s just not it. This never happens. This kind of severe title problems at a legitimate new car or high-end used car type operation. You don’t see this. So we’re all very curious to see why. Purely speculation. This is one reason it could be. It could be unpaid financing, unpaid loans behind the scenes for the inventory.
Call to ActionIf you are a buyer of a vehicle at Carvana and you have information, put in the comments or send us an email. If you have title problems, put in the comments or an email. We only hear more information from the front lines about what might be happening with this retailer. Been in the automotive and title business for over thirty years, and we have seen dealerships go out of trust, dealerships not pay off their floor plan, dealerships not pay off their credit lines, but it’s never been something this big. So if that is what’s happening, this would be a very unique and significant situation. Let us know what you think in the comments. Keep an eye out for future videos, and we’ll keep you up to date.
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