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Who Holds The Title On A Financed Vehicle?

When a vehicle is financed, one common question arises: who holds the title? This question is frequently asked by clients in our car title division.

Ownership and Liens
When a vehicle is financed, the owner, driver, or borrower is listed as the owner on the physical title. However, there’s a section on the title certificate that references the lien holder. This section indicates the entity from which money was borrowed to purchase the vehicle, such as a bank like Chase Bank or Ford Motor Credit.

Role of the Lien Holder
The lien holder, typically a financial institution, holds the title certificate while the loan is being paid. Although the owner’s name is on the title, the lien holder has a security interest in the vehicle as collateral until the loan is fully paid off.

Implications of a Lien
Having a lien on the title prevents the owner from selling the vehicle to another person. Until the final payment on the loan is made, the lien holder retains possession of the title certificate.

Transitioning Ownership
Once the final payment is made, the lien holder signs, stamps, and mails the title certificate to the owner. However, in some states, the lien holder may hold onto the title even after the loan is paid off, albeit with the lien marked as satisfied.

Paperless Titles
In some states, newer vehicles have paperless titles, meaning there’s no physical document issued. Instead, there’s an electronic record of the title held by the DMV.

Leased Vehicles
When a vehicle is leased, the leasing company holds the title. The lessee is listed as a registrant, but the title owner is the leasing company. Upon lease termination, the vehicle is returned to the leasing company.

Charge-offs and write-offs
If a loan goes into default and the lender writes it off, the charge-off designation doesn’t remove the lien from the title record. The lender may put the vehicle into collections, but until the lien is released, they hold the title certificate.

Understanding vehicle titles and financing involves knowing the roles of owners, lien holders, and the implications of financial transactions. Whether through financing or leasing, the title’s status is crucial for the legal ownership and transfer of vehicles.

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