What Is a Bonded Motor Vehicle Title?

by Scott Krohn

Bonded titles serve as a measure to prove ownership of a vehicle when the owner does not have a certificate of title. The status of a bonded title is technically provisional, usually lasting for three years depending on state laws. During this time, a bonded title can be challenged to determine the true ownership of the vehicle. If a challenge to ownership is successful, the title bonding company is required to pay the judgment. After three years a bonded title can be converted to a standard title. These titles can be used under a variety of circumstances.

How Bonded Titles Are Issued

Getting a vehicle title bond starts by requesting the required documentation from the DMV that, depending on the state, usually includes information about the vehicle and a “Statement of Fact” that describes the chain of ownership. After being completed, these forms can be used to apply for a title bond issued by a surety bonding company. Generally speaking, for vehicles valued at less than $5,000 the cost of a bond is around $100 as of publication, while the cost of bonding more expensive cars is determined on a case-by-case basis. Proof of the bond and the required paperwork is submitted to the state’s DMV or equivalent office for the issuance of a bonded title. Bonded titles are issued for a variety of transactions where a new owner does not possess an original title.

Title Not Delivered by the Seller or Donor

Non-delivery of a title can be the result of a dispute at the time of a vehicle sale, when a car is sold as part of a scam without a title, or when the seller is trying to conceal a lien holder listed on the title. In these situations, the buyer may be faced with a variety of problems, but a bill of sale can provide evidence of the purchase. A canceled check that supports the bill of sale can strengthen the claim of ownership. If the vehicle was gifted or donated and the original title cannot be located, the new owner may be required to provide a notarized letter that includes information about the original owner, the relationship between the two parties and the nature of the gifting of the automobile.

Title Document Left Open or Not Filled Out Correctly

An open title is created when a seller signs off on a vehicle but the information of the buyer is not added to the title for the purpose of transferring ownership. Unlicensed auto dealers often use open titles to buy cars and then flip them without paying the sales tax. By not being recorded as an owner, the seller also avoids the licensing requirements of legal automobile dealers. Titles may also be filled out with incorrect or outdated information on either the buyer or the seller. Both of these situations can put a buyer in a position where the status of the title prevents the transfer of ownership by the DMV.

Title Lost Immediately After Purchasing a Vehicle

A title that is lost prior to transferring ownership cannot be replaced by ordering a duplicate certificate unless the seller of the vehicle is willing to go through the trouble of ordering a duplicate title. If the seller is unwilling or unavailable, getting a bonded title may be necessary. The bill of sale backed by supporting documentation, including the receipt for the purchase and a copy of the canceled check, helps to prove legal ownership of the vehicle. The documentation can also serve as a formidable defense if the seller tries to challenge the legitimacy of the bonded title at a later date.

About the Author

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.