Whether you’re buying a new car or selling your current one, a vehicle title is a key document in the process.
Not only does the vehicle certificate of title — usually referred to as a car title — serve to show ownership of the vehicle, it can also let you know if the vehicle was damaged or defective.
Read on to learn what type of information is typically included in a car title, how it affects buying and selling your car, and which titles to avoid.
What information does a car title contain?
A car title, sometimes confused with vehicle registration, is the document that establishes who the legal owner of a vehicle is. Car title comes into play in the sale of a vehicle, and it may also be necessary if you plan to use your car as collateral for a loan.
A vehicle registration simply shows that you’ve registered your vehicle with your state’s transportation agency, as required by law, and paid the necessary fees. On the other hand, a car title, also known as a certificate of title, establishes who the vehicle’s legal owner is.
Here are some details that you can usually find on your car title, though take note that details can vary state by state.
Assignment of title: This section can be used to indicate a change of ownership. If the vehicle is sold, the “assignment of title” section must be completed before the title is given to the new owner.
Car make, model and year: The vehicle’s make and model are typically listed on the title, along with the year the car was manufactured.
Lienholder: If your vehicle is being financed, or leased, the title will usually list the current lienholder. In many states, the lienholder will maintain possession of the title until the auto loan has been fully repaid. If that’s the case, once the debt has been cleared the lienholder will typically be required to send you the title indicating the lien has been satisfied.
Odometer reading: The title can contain an area that shows how many miles were on the vehicle’s odometer at the time of sale. When ownership is being transferred, some states require the vehicle’s current mileage to be listed on its title.
Owner: The car’s certificate of title lists the name of the vehicle’s current owner.
Vehicle identification number: A unique 17-character code the manufacturer gives your car, a VIN can help buyers learn the car’s country of origin, its model year and type, and what airbag it has on board, along with other details.
Why is my car title important?
A car title plays a crucial role in the life cycle of your vehicle.
Depending on what your state requires, when you buy a car you’ll need to submit certain documents to your state’s department of motor vehicles or transportation authority to get a valid title.
But things can get more complicated if you’re buying a used car from a private seller. In this case, you’ll need to make sure the owner transfers the vehicle’s title over to you. And depending on your state, you’ll need to submit the appropriate documents to your state’s transportation authority to complete the process.
If you’re the seller and you hold the title of your car, you’ll need to transfer the title over to the new owner, usually by completing the assignment of title section.
Keep in mind that If your vehicle is financed, the lienholder typically maintains possession of the title. Once you’ve paid off the loan, the lienholder should send you the title. This means that if you still owe money on your car loan when you want to sell your vehicle, you may need to pay off the outstanding amount before you’re able to transfer the title over to the new owner. But you may be able to accomplish this by having the buyer make a direct payment to the lender for the balance that’s outstanding on the auto loan. Be sure to talk to your lender about this process and the requirements before you move forward with a sale.
Types of car titles
If a vehicle has no record of any significant damage, it can have what’s known as a clean title. But if it’s been damaged from something like a flood or car accident, this information may be reflected on its certificate of title.
Be careful if you’re thinking about purchasing a vehicle that doesn’t have a clean title. All used cars should be inspected by a mechanic prior to purchase, but this is especially important when buying a vehicle with a title that’s not clean.
Car titles can be classified in many ways. Here are a few.
This is a title that indicates the vehicle had water damage due to a flood, specifically from sitting in water deep enough to fill the car’s engine compartment.
Lemon Law title
Depending on your state, a Lemon Law title or warranty return can indicate that the car was once returned or bought back by the manufacturer due to serious defects covered by that state’s lemon laws.
This title is a type issued by states to a salvage-title vehicle that has been rebuilt or reconstructed to pass the state’s DMV inspection standards.
A salvage title indicates the vehicle was once declared as a total loss due to accident damage or other problems by an insurance company.
If you want to avoid buying a used car that has been seriously damaged, or one that has a history of significant defects, it’s a good idea to steer clear of vehicles with a salvage title.
Whether you’re buying a new car or selling your current one, a vehicle title is a key document in the process. If you’re shopping for a used car, a title provides information that can let you know if the vehicle is damaged or defective. And if you’re selling your car, you’ll need to figure out how to properly transfer the title over to the vehicle’s new owner.
Keep this important ownership document in a safe place. If you’ve misplaced your car’s title, contact your state’s DMV to request a replacement (but note that you may have to pay a fee).