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Automotive Car Titles: Everything You Need to Know

August 26, 2019 7 min read

A car title serves a very important purpose by offering proof of ownership. Anyone who has owned a car has, at one point, seen a car title but most of us don’t understand all the ins and outs of how titles work and this lack of understanding can often cause problems.

 

If you have ever found yourself wondering why some titles are different colors than others, what each color means, or what the laws are concerning each car title type, you’ve come to the right place. Today we’ll be going over everything you need to know about car titles so that you’ll never have to wonder again.

What is a Car Title?

A car titles, also known as a  Certificate of Title, is documentation issued by the state that provides evidence as to the car’s current owner. It should be noted, however, that there are a variety of different types of car titles and that a title isn’t always the be-all or end-all of discussion.

 

So, what can be found in a car title? The title includes a detailed description of the car, the owner’s name and address, and the motor vehicle assigned Vehicle Identification Number (VIN). Titles will also list the car’s current mileage and will include a different classification according to its total: actual, not actual, or mileage exceeds mechanical limits.

 

Although an automotive title sounds like a straightforward concept, it is anything but. In fact, there is much confusion that surrounds the subject. One problem that many car owners experience in relation to a car title, for example, is a mismatch between the VIN listed within a car’s title and the VIN found on the car itself. This is a considerable problem as a car’s VIN is the most important identifying factor that separates it from any other car, much like a fingerprint. If there is a discrepancy found between the title and the car itself, one should certainly be suspicious.

Different Types of Car Titles

Another subject of confusion for many is the different types of automotive titles. Many people fail to realize that there is not a single type of car title that only establishes to identify a car’s current owner- there are several different types all with different meanings. With so many different title types, it is easy to see how someone could get confused.

 

It is also important to note that car owners will sometimes classify a car’s title depending on the title’s coloring. While this may be a reasonable method of distinguishing one car title type from another within your state, these color variations should not be depended on as an explanation. This is because the color of a car title differs from state to state. For example, a clear title is printed on blue paper in some states whereas other states consider a blue title to be a salvage title. We encourage you to consult your state’s Department of Motor Vehicles (DMV) for a full explanation of the colors associated with each title type.

Certificate of Origin

A car’s certificate of origin is the very first official title documentation to be assigned to a vehicle. Certificates of origin are issued by the vehicle’s manufacturer and are assigned to the dealership that is receiving the vehicle in order to sale or lease. This form of a car title is used until the vehicle is officially transferred to an owner.

Clear Title

As the name implies, a clear title is an automotive title that is “clear” of any lien holdings. A clear title is the most desired title when purchasing a vehicle as it is an indication that the car has not sustained any irreparable damages and is the only title type that makes a vehicle eligible for financing.

Salvage Title

Salvage titles indicate that a vehicle has sustained an extensive amount of damage. To be more specific, a salvage title is issued to cars with damage extending beyond 75% of the car’s total value. While a vehicle with a salvage title can technically be repaired and made roadworthy again, this is left to the owner’s discretion and doesn’t mean that it can never regain a clear title. This also means that a salvage title makes a vehicle ineligible for financing by lenders.

Junk Title

A junk title, similar to a salvage title, is indicative of a vehicle that has damages extending 75% of the car’s total value. The only difference is that while a salvage title doesn’t make a vehicle ineligible for repairs that make it roadworthy, a junk title excludes a damaged vehicle from ever being legally driven. There are a few instances where your car would immediately meet this status; fire, flooding and hail damage. These specific types of damages must be extensive and either unrepairable or pose a safety and, or health risk to the driver.

Bonded Title

A bonded title can be classified as a title recovery option. Bonded titles can be utilized when there is a deficiency in a vehicle’s ownership documentation. A bonded title can be used as a safeguard against any future claims if a valid claim emerges in the future. A bonded title is purchased to equal the value of the car in question and can be used to remove any claims of ownership or liens. For example, if you purchase a car from a private seller but he/she doesn’t sign the title releasing ownership. This is known as title jumping and a bonded title is proof of ownership that can protect you down the line.

Rebuilt/Reconstructed Title

A rebuilt or reconstructed title is assigned to a car that has been completely restored to the required standards necessary to be deemed roadworthy. An in-depth official inspection is typically required before a rebuilt/reconstructed title can be awarded. Your states laws may differ but if the vehicle passes safety standards and emissions tests, you’re well on your to a rebuilt car title.

Lienholder Title

When a car is purchased but title possession is to be held by a lender, a lienholder title is established. Although the car is technically under the ownership of the buyer, the title will list the lender as the lien holder. Mechanic and body shops are also able to place a lien on your vehicle for unpaid work. This gets a bit murky if you are financing the vehicle, but your state will comply with the lien if you own your vehicle and do not pay for services rendered.

Export Title

In the event that a vehicle is being exported, it will need an export title in order to pass customs clearance. A clear title may be assigned to the vehicle in the country of destination if the vehicle isn’t declared upon exit from the country in which it is transported from.

Import Title

Just as an export title is utilized if a vehicle is being exported, an import title will be used when a car is imported. It is important to note that if a car isn’t of U.S. origin and instead manufactured for use in a different country, the vehicle will need to be certified for legal use in the country.

 

This verification process is left to agencies such as the Department of Transportation (DOT), National Highway Transportation Safety Administration (NHTSA), and the Environmental Protection Agency (EPA). Upon verification that the car meets all standards, an import title will be assigned for entry.

Electronic Title

Electronic titles are digital alternatives to actual title documents. They are just as legally binding but simply exist within a paperless format. Electronic titles can always be printed if physical documentation is needed.

 

What are the Laws Concerning Each Car Title Type?

Sales

Car titles are put in place to regulate the ownership and proper sale of all vehicles. When a seller is selling a car to a buyer, it is law that he/she possesses a certificate of title that is documented and recorded by the Department of Motor Vehicles. If the certificate of title isn’t in the possession of the seller due to loss, for example, he/she must request the certification from the DMV and pay the associated fees before a sale can legally be made.

Modifications

While certain modifications can legally be made to a vehicle’s title, these modifications must be made by following very particular guidelines. If a name needs to be changed, legal proof and the original title must be shown to the DMV and the title holder will need to complete the necessary application for approval. Any modifications made by other means is not legally binding.

Transfer Between Owners

There are several scenarios in which an owner wishes to transfer a vehicle’s title to a new owner in a method outside of a standard sales process, such as a gift. In the event of a car gift transfer, the new owner must take the title that has been signed over to them to the DMV along with the giver’s notice of transfer and necessary fee.

How Does a Car Title Affect Resale Value?

A vehicle’s resale value is only affected by salvage titles or rebuilt/reconstructed titles. Due to the substantial damages that exist in the case of these car title types, there are several factors that affect a car’s resale value. These factors are as follows:

 

  • A specific location where damage occurred
  • The extent of damage
  • The type of damage
  • The quality of repairs made

 

Before buying a vehicle with a salvage title or rebuilt/reconstructed title, it is important to make the necessary calculations based upon the above factors. You can do this by doing a car value search on KBB and indicating whether you are buying from a private party or established dealership. Next, you will want to determine the market value of the vehicle, add the estimated retail value to the trade in value, and divide by two. Upon contacting your insurance company to get a quote on the percentage with which they calculate a salvaged car’s value, you can then determine the car’s salvage value for resale.

 

Written by, Renee Rose