What is a car title?

Illustration of two people sitting across from each other at a desk and one person signing a piece of paper.

A car title is one of the most important documents you’ll sign when you purchase a vehicle. It establishes you as the vehicle’s legal owner and is often used for the vehicle to be registered and for ownership to be transferred.

The title is issued by the state where you live. While the information included in the document can vary between states, you’ll generally see the following details:

  • Vehicle identification number (VIN)
  • Make, model, year and color
  • Odometer reading
  • Owner’s name
  • Lienholder when the vehicle is financed

What to know when buying a vehicle

When you purchase a vehicle from a dealership, they typically take care of the title work as part of the vehicle sale. Buying a vehicle out of state may be a little different. In these cases, the dealer might give you the documents to take to your state agency yourself or they may mail it to your local office for you.

Most of us apply for financing when we’re shopping for a new vehicle. When this happens, there are some extra steps involved with the titling process.

In non-title holding states, the lienholder – your lender – will keep the title until the loan is paid off. You will only receive it when your account reaches a zero balance.

In title holding states, you’ll get the title shortly after you purchase the vehicle with the lienholder listed. Once your account is paid off, your lender will send you a lien release that then gets attached to your original title.

Many states are now using an electronic car title system called an Electronic Lien and Title (ELT), or e-title. An ELT is simply a stored, electronic record in a database that may be converted to a paper title later.

For financed purchases, the state will send the lienholder an electronic transmission of the title record instead of paper documents. As an example, say that your loan is paid off. This action will need to be taken on the title record. As such, the lender will send an electronic transmission to the state to remove the lien.

Depending on how the state’s electronic title program works, a paper title may be issued and forwarded to the legal owner or the title may remain an electronic record until the owner requests a paper one.

Nearly half of the states currently have either mandatory or voluntary electronic title programs, and more are expected to be added soon. If you are wondering about your own state and would like to learn more, reach out to your local state titling office for more information.

Transferring a title

Your vehicle’s title will likely be needed when it’s time to transfer ownership of the vehicle. There is often an assignment of title section on the back where details including the buyer’s and seller’s names and addresses, date of transfer and signatures are recorded. Some states will use a separate title assignment document for this purpose.

When you sell or trade a vehicle at the dealership, your dealer will take care of the title transfer as part of the paperwork (except, as noted above, for out-of-state transactions). If you’re selling a vehicle privately, however, it’s something you will need to complete with the buyer.

Should you owe money on the vehicle you’re selling, you’ll need to contact your lender to pay off the loan or arrange with the buyer to have the balance paid off within the terms of the sale.

Storing and updating your car title

When you receive your title, be sure to keep it in a safe place so that it’s protected and handy when needed. It’s also important to keep your details updated to avoid any inconvenience or delay on a future transaction.

For instance, if you change address, contact your motor vehicle agency’s title office to have the address updated. In the event you move to a different state, check whether that state requires you to change your title and, if so, work with your local office to have your title forwarded.

If you receive your title from your lender, one of the most important things you can do is to contact the title office to have the lender removed and a new title issued. By doing so, if the title is ever misplaced, you’ll be able to get a duplicate copy without having to contact your former lender to get a lien release.

Save time and effort. Shop vehicles

Shop for a vehicle

A car title is a key part of the vehicle ownership journey. If you’re at the start of that journey and looking for a vehicle, begin with a dealership near you. They can also help to answer most title-related questions when it comes to vehicles they have in their inventory.

For more information about this and other topics, including helpful articles regarding financial wellness, please visit our Learning Center.

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