Understanding a Used Car Title: A Guide

Most Houston drivers know that their used car title is important, but not everyone understands all of the reasons why. If you’re interested in learning more about your car title, how titles may differ, and its role in the purchase or sale of a vehicle, this used car title guide is for you.

Car Title Purpose

A used car’s certificate of title – commonly referred to as the car title – is a legal document that describes a vehicle’s legal ownership.

The Texas Department of Motor Vehicles issues car titles. Your car title document contains details such as 1) the vehicle owner’s name and residence address, 2) the vehicle model, make, and year, and 3) the date on which the vehicle was sold.

If the car is sold to a new owner, the current owner must sign over the title to the new buyer. The new buyer then registers the used vehicle in his/her name.

In addition to the indication of vehicle ownership, the car title provides relevant details about the vehicle’s history. This information is very important when you’re buying a used car.

Title Types

Each vehicle starts out with a clean title.

If the vehicle is stolen or damaged, the insurer files to change the vehicle’s title. The purpose of the title change is to record major events for the benefit of future buyers or insurers.

Most states acknowledge these title classifications:

1. CLEAN TITLE
   If you’re looking for a used car, you’re likely to prefer a clean title. The clean title reflects that your vehicle hasn’t previously been declared as a total loss or suffered any major damage. A clean title doesn’t mean that the car was never involved in any accident, but shows that the car was never given a salvage title.
2. CLEAR TITLE
   Some folks interchange clear title with clean title. These title types are quite different. A clear title means that there isn’t a levy or financial lien on the vehicle for sale. When the vehicle owner possesses a clear title, he or she is the owner – creditors, lenders, or third parties can’t claim ownership in that case.
3. SALVAGE TITLE
   If the vehicle was previously damaged in a disaster, accident, fire, or flood, the amount of damage is greater than a certain percent of the vehicle’s value, the insurer may determine it’s too costly to repair it. In general, the DMV issues a salvage certificate of title. This means the vehicle can’t be sold or driven in the current condition. Potential buyers of the vehicle should consider the salvaged vehicle with care. Although the price of the vehicle may be appealing, it may be difficult or more expensive to insure or have a lower resale value.
4. REBUILT OR RECONSTRUCTED TITLE
   When an owner repairs a salvaged vehicle, the DMV issues a rebuilt or reconstructed title. The vehicle must be thoroughly inspected to determine that the repairs are sufficient before the title is issued. It may be more difficult or expensive to insure a rebuilt or reconstructed vehicle as well.

How to Request a Duplicate Title

If you lose or destroy your car title – or it’s stolen – you should immediately request a duplicate title from the DMV. Without your car title, you can’t prove ownership of the vehicle or, if desired, sell your vehicle to someone else in the future.

If a lender has financed the vehicle, it will need to complete the Texas application for certified copy of title. Note that if you recently applied for a certified copy of title, you must wait another 30 days to request another from the Texas DMV.

You may apply for a certified copy of title in person at the Texas DMV or apply by mail using these steps:

• Request Form VTR-34 (Application for a Certified Copy of Title) from the Texas DMV.
• Include your vehicle VIN (vehicle identification number), year, make, and model, your name, driver’s license number, address, and information about secured loans on the vehicle.
• Provide a copy of your valid photo identification and enclose a $2.00 check, money order, or cashier’s check made payable to the Texas Department of Motor Vehicles.
• Contact the lienholder, if applicable. If the vehicle has a lien, the lienholder or its agent must enclose a letter of signature authority on its letterhead (or enclose a copy of the agent’s employer ID/business card).
• Mail the application, fee, and documentation to: Texas Department of Motor Vehicles, 1601 Southwest Parkway, Suite A, Wichita Falls, TX 76302.

The Role of Your Car’s Title in the Purchase or Sales Process

Many Houston used car buyers finance their vehicles through a credit union, bank, or finance company. According to the Texas Office of Consumer Credit Commissioner (OCCC), about 85 percent of new vehicles and more than half of all used vehicles were financed last year.

If you haven’t paid off your car loan but want to sell the vehicle, you must 1) contact the lender (it holds the title) and 2) request special processes/steps to follow to complete the sale of the vehicle to a new buyer. This information helps you to decide how to pay off the remainder of your note before completing the sale of the vehicle.

After you pay off the remainder of your loan, the vehicle title is clear. It’s now possible for you to take the car title from your lender. Allow at least 30 days to receive the title.

If the new buyer is financing the vehicle, the vehicle title transfers to the new lender.

Used Car Title Considerations

Since the car title contains important information, it’s important to review it with care. For instance:

• The car title often includes vehicle mileage information. Compare the title mileage with the odometer reading. If the seller tells you that the odometer reading is accurate, review the title before agreeing on the price of the used car.
• The car title vehicle information number (VIN) on the title should match the actual VIN on the vehicle. Find the VIN near the windshield base A-pillar (may also be found on other parts of the vehicle). All VINs on the vehicle should match the VIN on the car title. Don’t assume that a VIN mismatch is just a typo!
• A salvage or rebuilt used car title may cause confusion. Not all salvage or rebuilt titles are automatic red flags. This type of vehicle may be a good buy for the driver willing to invest time and money in it. Understand that a rebuilt salvage car title doesn’t mean the car is safe to drive in its present state.

Car Title FAQ

What’s a lienholder?

The lienholder is the lender, e.g. a bank, credit union, or finance company that loaned the used car buyer money to purchase it. A used car loan is a secured loan. The vehicle is the collateral used to make the loan.

What’s a Vehicle Identification Number (VIN)?

The VIN is a number letter sequence assigned to your vehicle by the original manufacturer. The VIN is used to identify the specifications of your car, e.g. the model, make, and year of manufacture.

What’s a Bill of Sale?

The Bill of Sale records the transaction between the buyer and seller of the used car. Generally speaking, the Bill of Sale includes the transaction date, the vehicle being sold (e.g. the year, make, and model of the vehicle, the VIN, the weight of the vehicle, and the mileage-odometer reading), the transaction amount, the place where the transaction occurred (e.g. the city, county, and state), and the names/addresses of both the buyer and seller, and the parties’ signatures.

Why is a clear title important?

A clear title demonstrates that the vehicle is owned by the individual and that the vehicle has no liens or money owed on it.

The physical paper title is issued by the Texas DMV. It shows the vehicle’s ownership.

Why is the car title transfer so important?

You must have a car title to buy or sell any vehicle in Texas.

What happens after I buy a used car from a dealer?

If you buy a car from a dealer in Texas, the dealer files the appropriate paperwork with the Texas DMV. If you own the car, the title will be transferred to your name. If you financed the car, the Texas DMV adds the lender as a lien holder.

Understanding Used Car Titles

Use the information on a used car title to learn more about its history. Ask questions before choosing your used car.

When you’re ready to buy a great used car, Shabana Motors can help you save money on your purchase. If you’re looking for a late model used car, we’ll help you find the right one to fit your lifestyle and budget. Check out our inventory now or contact us with questions.