by Armando Martinez
Every day, thousands of people purchase vehicles and receive car titles as a result. Much like the deed to a house, a car title is a legal document that comes with every vehicle in the US and gives you ownership of a purchased vehicle. But it's not enough to just have a title. When buying or selling cars privately, you want to be sure you have a clean car title or fully understand and accept the condition of your title.
What exactly does it mean to have a clean car title? Read on to learn what a clean title is and why it matters. We'll also break down the types of car titles and one major danger you should avoid.
What Is a Clean Title and Why You Should Care
To understand the clean title meaning, you first must understand what you'll find on every title. A car title will always include important information about your vehicle, such as:
- Vehicle Identification Number (VIN)
- Year Manufactured
- Manufacturer (Make)
- Model
- Odometer reading
The title will also disclose any loans or leases. If a loan or lease appears on the title, before making a purchase always make sure your seller makes any final payments and receives proof from their lender or lessor that no liens remain.
Finally, the title lets you know if the vehicle is defective or damaged. There are two categories of titles: clean titles and branded titles.
So what does a clean title mean? Put simply, a clean title means the vehicle has a clean record with no damages.
A branded title, on the other hand, means the vehicle has incurred severe damage that must be disclosed. These are typically advertised as damaged for sale.
Since the title gives you such vital information about the vehicle and its condition, you never want to underestimate its importance when you purchase a vehicle.
What Are the Types of Titles?
Overall, the type of title indicates the condition of the vehicle. Before making a purchase, knowing the details of its title will help you understand its history and the potential work it needs to be operable.
Flood Damage Title
A flood damage title indicates the vehicle has incurred damage from being submerged in water deep enough to fill the engine, cabin, or trunk. This can ruin the car, even causing the engine or electronics to stop working completely.
Salvage Title
A salvage title indicates a vehicle has sustained severe damage and has been declared a total loss by an insurance company. This occurs when the repair cost exceeds the current value of the vehicle.
In most states, a salvage title includes a vehicle that may have had one of the following:
- Collision damage from a major accident
- Fire damage
- Storm damage, such as a hail storm, hurricane, or tornado
Salvage titles may also include motor vehicle theft, which occurs when a car has been stolen and recovered after it was declared a total loss by an insurance company.
In most cases, the insurance company will take possession of salvage vehicles and send them to a specialized auction house. Some auto body shops may choose to repair salvage title cars, have them inspected, and put them up for sale with what will then be called a rebuilt title.
Fleet Vehicle Title
A fleet vehicle title is used for vehicles that were commercially owned and used. These types of vehicles were used for business purposes by different industries, such as:
- Car rental companies
- Police departments
- Taxicab companies
- Local delivery companies
- Government agencies
Unlike a flood title or salvage title, a fleet vehicle title does not necessarily mean the car has a poor history. In fact, these cars are more likely to be clean and regularly maintained. However, likely have no manufacturer warranty and are more utilitarian than the typical personal vehicle. Separately, they may have been modified for their specific prior use, like a police car.
While a car may have various types of titles, its branding (flood damage title, salvage title, or fleet vehicle title) can give you a clear indication of the potential issues that can come with a vehicle. These factors are important to lenders when evaluating the value of your car and whether to provide a loan, potential future buyers when determining a price, and insurance companies when they form policies.
So, how does having a clean title affect your insurance rates?
How Does a Clean Certificate of Title Look to Insurance Companies?
Your insurance company may have asked to see your vehicle title or checked the information on their own when you were looking to purchase a policy. This is so they can get a full understanding of the state of your vehicle.
Since a clean title indicates the vehicle doesn't have any pressing issues that may cause failure and at-fault accidents or issues down the line, they may be more likely to issue you a cheaper policy with better coverage options.
Branded titles, on the other hand, typically require a state-authorized safety inspection to ensure they meet state vehicle standards.
Though rebuilt titles have been cleared to drive on the road, it may be more difficult to get higher coverage. Some companies may place limitations on the coverages you can get, while others may not cover cars with rebuilt titles at all.
Watch Out for Title Washing
Since a title is considered a legal document, it can be easy to believe the information on it at face value. However, some car sellers participate in an illegal act called title washing — fraudulently removing negative history from a title or converting a branded title to an unencumbered clean title.
This can be accomplished in several ways:
- Moving the vehicle to a different state
- Applying for a new title without disclosing the vehicle's history
- Physically altering the vehicle's original title
Why is this dangerous?
Cars with branded titles typically are only worth 30% to 50% of the current market price. However, victims of title washing usually end up paying much more for the car than it's actually worth. They will also end up purchasing a car with significant safety or reliability issues down the road — issues that are difficult or impossible to repair.
It's important to always complete a thorough pre-purchase inspection in person to check the interior, engine, and exterior of the car. You can also check the vehicle's vehicle history report using its VIN to get information about its history, including the current owner and any previous owners.
It's essential to know your car’s title and what it implies before you make a purchase. This informs you of any potential issues and possible limitations with loans and insurance.
This article was written by Armando Martinez. Armando Martinez is among the nation’s experts on automotive titling, registration, DMV services and document operations. With nearly two decades of experience across a broad range of financial services functions and some of the largest names in auto, from Wells Fargo to Uber, Armando combines vision and ingenuity with a wealth of information so auto shoppers and sellers can learn from his experience.
