How to Buy a Vehicle With an Open Titleby Scott Krohn
To legally transfer ownership after the sale of a vehicle, the seller signs the certificate of title to release ownership to the buyer. Under normal circumstances, the buyer completes the new owner’s section, takes the title to the DMV, and assumes ownership. An open title is the result of the buyer neglecting to fill out the new owner’s section to assume ownership of the vehicle. As a result, the car can be sold again without the buyer being recorded by the DMV as the owner. This poses several risks to the next person that buys the vehicle.
Reasons for Leaving a Title Open
Vehicle titles are left open for several reasons. The first is to avoid paying the sales taxes due when ownership of the vehicle is transferred. Unlicensed car dealers may leave titles open to avoid going on record when selling multiple cars in the course of a year. This helps them to stay under state-imposed limits for vehicle sales that would otherwise require licensing.
A title also can be left open temporarily if the buyer loses it before transferring ownership at the DMV. This situation can be fixed by the seller filing for a duplicate title and signing it over again, or with the buyer applying for a bonded title that can be used to transfer the ownership of the vehicle.
Identifying an Open Title
The seller of a car that has an open title will not be the same person listed on the front of the document. This can be determined by asking for the identification of the person who is selling the car to see if it matches the name listed on the title. If the names don’t match, you are looking at a vehicle with an open title. This doesn’t necessarily mean that the car is going to pose problems, but you should proceed with caution and do some extra research before making a final decision. Your due diligence should focus on determining whether you will be able to transfer ownership of the vehicle to your name after making the purchase.
Purchasing a VHR
Several services provide vehicle history reports that can reveal potential problems with transferring the title after buying a car. The National Motor Vehicle Title Information System is part of the government’s anti-vehicle theft program, while Carfax and AutoCheck are private companies. Reports from NMVTIS cost $4.95, AutoCheck charges $19.99, and Carfax charges $39.99. You can order a VHR by going to the provider’s website and entering the vehicle identification number of the car, which generally can be found on the driver’s side of the dashboard.
Once the VHR is displayed, look for any information related to the certificate of title. If a lien or an open stolen vehicle report is listed, you won’t be able to transfer the title. If there nothing is listed in this section, the title is probably clean, but you’ll still want to confirm this with the DMV.
Check the Title at the DMV or AAA
Purchasing a VHR can alert you to problems that may prevent the transfer of ownership, but the final say on transferability rests with the DMV. For example, a VHR may not pick up a lien that was placed against the certificate of title in the days immediately preceding the proposed sale of the car, but the encumbrance will be on file with the DMV.
For the highest level of protection when buying a car with an open title, make an appointment a DMV or an AAA office that provides DMV services. Have it run a check on the title to look for recently recorded liens and stolen car reports that might prevent the transfer of ownership. If the title is clear, you can transfer ownership after making the purchase.
After working for 21 years as a licensed adviser specializing in corporate and private finance, Scott Krohn began his writing career in 2008 covering a variety of topics including business, personal finance, health, and IT. He graduated from Cal State University, Long Beach with Bachelor of Arts degree.