The biggest risk of purchasing a car without a title is that there may be issues that prevent the transfer of ownership to the buyer. While there are legitimate reasons for a seller to be without a certificate of title at the time of the sale, the absence of a title may also be a way to defraud the buyer.
When a car that was financed is being sold prior to the loan being paid in full, the title will be in the possession of the lender. This is a common situation that requires the loan to be paid in full before the certificate of title can be mailed to the vehicle owner. For the buyer of the vehicle, the safest way to execute this type of transaction is through an escrow company that will coordinate the payoff of the loan, the delivery of the title, the transfer of ownership, and payment to the seller. If the title isn’t delivered or ownership cannot be transferred, the escrow company will return the money intended for the purchase to the buyer.
Unless a lender can be confirmed as a lien holder, the risk escalates quickly for the buyer when the seller does not have the title at the time of the transaction. It is well within the buyer’s rights to ask the selling party to apply for a duplicate title before the transaction is finalized. If the seller balks at ordering a replacement, the absence of the title might be because the car was stolen or branded as a salvage vehicle. If the vehicle has been stolen, a genuine title will not be available. If the car has been branded as a salvage vehicle, the seller may be withholding the title to prevent the buyer from finding out about it. If the buyer still wants the vehicle despite these risks, there are additional steps that should be taken to learn about the history of the car before finalizing the purchase.
Vehicle history reports can document a wide range of information about a car’s past. The reports gather information using the vehicle identification number of the car, which can be found on the top of the driver's side dashboard or the driver's door frame. The National Motor Vehicle Title Information System is part of the federal government’s Anti-Car Theft Act of 1992 and provides VHRs that document salvage designations as well as stolen car reports. Carfax and AutoCheck are private services that expand on the information provided by the NMVTIS, with data points that include Lemon Law returns, lien holders, air bag deployments, flood damage, and maintenance histories. Purchasing a VHR can uncover a range of historical issues with a vehicle that can prevent the transfer of ownership.
VHRs can provide information about the vehicle's history, but might not include more recent information. For example, mechanic’s liens are placed against vehicle titles with the state DMV for non-payment of work that has been performed. In some cases, mechanic's liens might take time to end up on a VHR. Stolen car reports are also filed with the DMV and might take a period of time before being picked up by a VHR service. You can confirm that the title is clean by going to a DMV or equivalent state office with the VIN of the car under consideration to check for the most recent filings. This also can prevent the purchase of a newly stolen vehicle or one that will require a lien to be paid off before ownership can be transferred.
