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A car title is a key piece of documentation that shows who owns the vehicle as well as identifying information about the vehicle. The title will typically list the lender or lienholder if you’re repaying a car loan. In most states, the title is held by the lienholder until you finish paying off the car loan.That said, what is a vehicle title, exactly? How do you get one and how much does it cost? What else is important to know about a car title? This post takes you through these commonly asked questions and more.The Purpose of a Car Title
A car title has one purpose: to show who legally owns the vehicle. As such, this document is used to record when ownership is being transferred from one person to the next. A car title typically lists the registered owner of the vehicle and any lienholders with a security interest in the vehicle. In general, lienholders will not appear on the title if the registered owner has 100% equity. You gain 100% equity in the car when you pay off a car loan or when you buy a new or used car outright.Recommended: Is an Auto Loan Secured or Unsecured?Car Title Defined
A car title is an ownership document that contains important information about the vehicle and its owner(s). Either the state department of motor vehicles (DMV) or department of transportation issues it when the car is sold.What Is Included on a Vehicle Title?
A car title will contain the name of the owner along with other key pieces of information that can vary by state. Here’s some of the information that’s typically found on a car title:Vehicle Identification Number (VIN)
A car title will usually include a vehicle identification number or VIN, which is typically a 17-digit unique code. Its characters and digits encode key information about the vehicle, such as the country of origin and engine type.Vehicle Description and Odometer Reading
The automobile title will list identifying information about the vehicle, such as its year, make and model. It may also include the odometer reading, which lists the number of miles it has been driven at the time of titling.Lienholder Information
Lienholder information will typically appear on the title if you owe money on a secured auto loan. A lienholder is usually a financial institution, and your lienholder may repossess the vehicle if you default on a car loan.When you pay off your car loan, there would be a change in the type of title you would physically possess, from a lien title to a clear title. (Some states issue electronic or paper titles.)Types of Automobile Titles
A car title in some cases can tell you whether the vehicle has a history of being rebuilt or whether a lienholder has a security interest in the vehicle:- Clear title: This is a title that has no loan (lien) on it. If you have a clear car title, this means you’re the sole owner, with no other party having any legal claim on the car.
- Lien title: If you’ve financed a vehicle, then the lender/lienholder has an interest in that vehicle until the loan is paid off. A title with the lienholder’s name on it is a lien title.
- Clean title: This means that a car has never been in an accident in which it was declared a total loss. This is something you’d want to know if buying a used car.
- Rebuilt title. This indicates a car that was wrecked to the point of being declared a total loss but was repaired and is now drivable again.
- Salvage title. These are vehicles that, after a wreck, are considered a total loss. This does not mean that it has no value; rather, the costs to repair it exceed that value.
Recommended: How to Transfer a Car TitleHow to Get a Car Title
Car titling laws can vary by state. In most states, you’ll generally receive a title when you gain 100% equity in the vehicle. This can happen when you buy a new or used car outright or when you pay off your lienholders in full.Some states, however, may give car titles to the registered owner even if lienholders have a security interest in the vehicle. Here are the states that may give lien titles to the registered owner:- Kentucky
- Maryland
- Michigan
- Minnesota
- Missouri
- Montana
- New York
- South Dakota
Oklahoma used to give lien titles to the registered owner, but not anymore. Oklahoma became a title-holding state as of July 1, 2022, which means any newly issued car titles in the Sooner State will now be held by the lienholder if there is an active lien.Titles are issued by a state’s department of motor vehicles (DMV) or their department of transportation. If you were to misplace your car’s title, however, rest assured there are ways you can get a replacement car title.How Much is a Car Title?
There is typically a title fee when you first purchase a vehicle, with the amount varying by state. Some states charge a fee of $10 or less, while other states may charge a fee of more than $100. The cost of an original title in Illinois, for example, is $165 as of 2023.Note that a title fee is different from a registration fee. A title fee is typically a one-time fee, whereas car registration fees typically must be paid annually or biennially as long as you own the vehicle. You can register a car without a driver’s license in all states.When Is a Car Title Required?
States typically require you to apply for an original title or title transfer within days or weeks of buying a new or used car. Car titles are exchanged when you buy, trade in, or sell a car. If you auto loan refinance your vehicle with a lender other than your current one, then the lienholder will change on that title.Here’s more about each type of transaction when a car title is required:Title Jumping: Trading, Buying, or Selling a Car
If you decide to trade in your car, you would go to the dealership that has the vehicle you want to buy or lease. Let them know that you’d like to use your current vehicle as a trade-in, and they’ll appraise it and offer you a certain amount of money. Usually, this money goes toward the purchase or lease of your next vehicle. If this process is a go, then you’ll sign the car title over to the dealer, making them its new legal owner.When selling your vehicle to a private individual (and there is no outstanding loan), you’d sign the title in the correct spot to indicate that you plan to transfer ownership to the buyer. It’s important to sign in the right spot to avoid delays in the transaction. If you want to sell a car but you have a lien title (indicating that a loan still exists on the vehicle), contact your lender to find out how to handle the process. The loan must be paid off before the title can actually transfer to the new owner.Title Transfer
Once a seller has signed off on a clear title to release their ownership (and any additional information required by the state is filled in), then the buyer can take the automobile title to the appropriate state office to have a new title created in their name. If there are two current owners, both will need to sign the title. In some states, this transaction may need to be notarized, so check what your state requires.If there is a loan on the vehicle, work with your lender to transfer ownership.Recommended: Can Someone Take Over My Car Loan? Title Loan
With a car title loan, you give a lender the vehicle title in exchange for a short-term loan (typically a term of 30 days), usually for a small amount of money. You’d need to pay a fee for this service and, if you can’t pay back the money, the lender can repossess your vehicle. This type of loan can be quite expensive.Refinancing Your Vehicle
Refinancing your car loan with a new lender will change the lienholder information on your title. If you’re thinking about when to refinance a car, one important thing to do is to find out what loan-to-value ratio (LTV) a lender requires, which compares the amount you’re borrowing to the value of your car.Some auto refinance lenders may offer an LTV ratio of up to 125%. Refinancing may be right for you if you can secure a lower interest rate, but you may pay more interest over the life of the loan if you refinance with an extended term.Once you do the math and determine you’re good to go, make sure you’ve read up on the process of how to refinance a vehicle — more specifically, the information to gather before you do so. Proof of car insurance and proof of income is typically required to refinance a car loan.The Takeaway
A car title demonstrates who legally owns that vehicle and contains important information about the vehicle and its registered owner. There are several types of car titles, including a clear one (where there is no loan) and a lien title (where there is a loan/lien on the vehicle).If you’re interested in refinancing an auto loan, Lantern by SoFi can help. Just fill out one simple form to access loan offers from multiple lenders in our marketplace.Lantern can help you compare prequalified rate offers in minutes. Photo credit: iStock/nazar_ab
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About the Author
Kelly Boyer Sagert
Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
