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If you own — or have ever legally owned — a vehicle, then you should have been given a vehicle title upon its purchase, even if you financed the vehicle. A car title is a key piece of documentation that shows who owns the vehicle as well as identifying information about the vehicle. It is needed to sell or register a vehicle.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 Vehicle 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. When you buy a new-to-you vehicle (whether it’s actually new or used), you’ll need to present the title to the appropriate office to register the vehicle in your state.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 or department or transportation issues it when the car is sold. Nowadays, many states allow you to have an electronic title rather than the traditional paper document.What Is Included on a Vehicle Title?
An automobile title will contain the name of the owner along with other key pieces of information that can vary by state. Vehicle Identification Number (VIN)
A car title will usually include a VIN. Each vehicle has a unique 17-digit VIN to identify it. Its characters and digits encode the country where it was built; the manufacturer; its model, engine type, transmission, body type and restraint system; a U.S. Department of Transportation-generated number for verification; the model year; manufacturing plant location; and a distinctive six-digit identifier.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.Lienholder Information
If there is a loan on the vehicle, that’s also known as a lien, with the lienholder being the financial institution where the loan was granted. When you pay off your loan, there would be a change in the type of title you would physically possess, from a lien title to a clear title.Types of Automobile Titles
- 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.
How to Get a Car Title
Titles are issued by a state’s department of motor vehicles (DMV) or their department of transportation. You generally would receive a vehicle title when you purchase the vehicle.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 a typically a title fee when you first purchase a vehicle, with the amount varying by state (although not all states charge title fees). Some states charge a fee of $10 or less, while other states may charge a fee of more than $100.Note that a title fee is different from a registration fee, which allows a driver to legally operate a vehicle. Registration fees also can vary significantly by state and must be paid either annually or biennially to renew registration.When Is a Car Title Required?
Car titles are exchanged when you buy, trade in or sell a car. If you 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 & 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. 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
If you’ve currently got a loan with Lender A and want to refinance at that same financial institution, then the lien title will remain with that lender. However, if you currently have a loan with Lender A and recognize you can get a better detail with Lender B, then, as part of the refinancing process, the lienholder on the title would change from Lender A to Lender B.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. Many lenders want to see an LTV of 80% or 85%.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. This includes your vehicle title (possibly the registration, too), as well as proof of car insurance, verification of income and employment and other details about your vehicle.The Takeaway
A car title demonstrates who legally owns that vehicle and contains important information about the vehicle and its owner. There are several different types of automobile titles, including a clear one (where there is no loan) and a lien title (where there is a loan/lien on the vehicle). Additionally, there are several circumstances when a car title is needed, such as when a car is sold or traded in, or when a car is refinanced.If you’ve been considering refinancing your auto loan, you can streamline the process by filling out one quick application at Lantern by SoFi. By doing so, you can compare auto loan refinancing rates.
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.
