Vermont Title Loophole Pros & Cons

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 Process
Let’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 Works
The 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 Loophole
What 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 Issues
Another 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 Rejections
Some 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 Restrictions
What’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 Types
What 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 Loophole
We’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 Title
One 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 Title
What 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 Liens
Another 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 Contact
One 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.

Conclusion
I’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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