How Do Car Titles Work?

How Does a Car Title Work?

Three important documents are kept safe when owning a vehicle--the registration, insurance and title. Having a title identifies you as the owner or leaser of a car. A paid-for car can't be sold without a title. However, if you're buying a new car, the lien holder or finance company may preserve your title until the loan is paid in full. A title can also be used to place a lien on a car if the car is owned outright.

Who Issues a Title?

A certificate is issued by the Department of Motor Vehicles to the owner. The certificate lists the name and address of the owner, make and model of car and the date sold. The title also contains a VIN number. A Vehicle Identification Number is placed at the bottom of a windshield etched in the metal. This combination of letters and numbers distinguishes the vehicle from other like vehicles. The VIN number may also be found on the passenger window at the bottom for extra security purposes.

Adjustments to Title

Any registration adjustments of a vehicle can change ownership. All changes must be updated with the DMV. These changes include the sale of a car, gifting, adding or deleting an owner, inheritance, completing a financial loan with a lender or loaning against the title. When the loan is completed with a lender, the financial institution submits the paperwork to the DMV and mails the title to the owner, who may take a loan against that vehicle with a title loan company. The owner is to bring any legal documents that relate to the car, including insurance. The name on the title doesn't change on the certificate with the loan unless you default. However, the lender will report to the DMV that there is a lien against your mobile property. If you default, the lender has the option of selling the car at auction or allowing you to repay the entire balance owed.