If you have a car that you’d like to sell or gift to a family member, you’re required to legally change the vehicle’s ownership by transferring the title to the buyer/recipient. You can sell or gift the ownership of your car to your parents, children, spouse, siblings, grandchildren, or even your grandparents.
In this article, we’ll discuss how to transfer a car title to a family member and whether those transfers are possible if the title has a lien.
What is a Vehicle Title?
A car title is an official, government-issued document that certifies ownership of the vehicle. Every time you buy a new car from a dealership or another retailer, they have been required to submit a Manufacturer Statement of Origin to your state’s department of motor vehicles for at least the past 50 years.
The Manufacturer’s Statement of Origin demonstrates the car’s new status together with the vehicle identification number (VIN) assigned to it and the manufacturer’s transfer of ownership to you, the new owner. However, every time a car is transferred from your ownership to a new owner, all 50 states demand that you complete a title application.
The Department of Motor Vehicles, also known as the DMV office, will handle the paperwork after you submit the title application and eventually issue you a real vehicle title on watermarked paper for your personal records.
You should fill out the relevant parts of the title when you sell your car so that the next buyer can use it to establish the chain of ownership. They will then apply for their own title, which they will eventually get in the mail.
It should be noted that some states—nine of them—don’t require car titles for older vehicles. Though the age limit varies by state, older vehicles can get by with only a bill of sale and current vehicle registration documents. Other 41 states require a car title for all vehicles, regardless of age.
Types of Vehicle Titles
There are at least 18 different types of vehicle titles, though you likely won’t encounter the majority of them.
- Affidavit — states issue these temporary titles when some documentation related to the vehicle is missing.
- Bonded — bonding is a costly way to demonstrate ownership when obvious ownership isn’t previously established. It entails posting a cash bond in an amount equivalent to the estimated value of the car. The bond will compensate an irate party if an ownership dispute arises, even when the title has already been issued.
- Certificate of Destruction — this title is issued for a car that the insurance company will destroy when a particular claim is resolved.
- Certificate of Origin — the initial ownership paperwork is transferring a vehicle from the manufacturer to the dealer.
- Clear — this designation identifies that the title is clear of liens.
- Electronic Titles — in some states, getting an electronic title is the first step toward getting a physical one.
- Export — this title is granted to vehicles for obtaining customs clearance in another country.
- Flood and Water Damage — this title is exactly what it says it is. It’s the name given to a car that has suffered significant water damage.
- Import — the initial title that the US issues for a car that wasn’t made or sold within the US.
- Junk — the title granted to cars that will be demolished or scrapped and sold for parts.
- Lemon — lemon is a title designation for vehicles that are under warranty but experience continuous electromechanical problems. This title is usually granted to vehicles on which the manufacturer couldn’t fix a recurring issue after four separate attempts.
- Manufacturer’s Statement of Origin — as previously stated, the MSO demonstrates that the new vehicle is transferred from the dealership to the first owner.
- Odometer Rollback — this title is applied to vehicles in which the odometer has been tampered with, making it impossible to determine the precise odometer reading.
- Part Only — designates a vehicle that’s only suitable for salvaging parts.
- Rebuilt and Reconstructed — these are comparable titles granted to any vehicle that has been rebuilt for usage on the road will receive these titles.
- Salvage — this title is placed when a vehicle is declared totaled by the insurance company. Although a salvage title is rarely altered, it does permit the owner to keep using the car.
Do You Need to Notarize the Title?
Some states require title notarization, during which you have to provide your driver’s license or any other form of government-issued ID. Notarizing the title isn’t something you should concern yourself with when buying a new car. The dealership handles the title paperwork, but you’re handling the necessary fees.
However, it’s worth noting that most states allow owners to apply for the title and submit the paperwork to the DMV office without any oversight.
What Happens if You Don’t Have a Title?
One of two things has happened: you either never received your title in the mail, or you’ve misplaced the proof of ownership.
The former mostly happens when you take out a loan to purchase the vehicle. You are the legal owner of the vehicle, and your name is on the vehicle’s title. However, the lender is also listed as the lienholder, and in 41 states, the DMV office will send the title directly to the lienholder. Once you’ve completely paid the loan off, the lienholder will send the title to you.
In the remaining nine states, the DMV sends the title directly to you, regardless of whether there’s an outstanding loan on the car. Nonetheless, the title will list you as the legal owner and the lender as the lienholder.
Listing the lender’s name on the title ensures that you can’t sell the vehicle until your loan is paid off. However, after you repay the loan, the lienholder will sign the vehicle’s title directly to you — this process takes approximately five days to complete. When done, you’ll receive the Letter of Release, which allows you to receive a title in your name with the lender’s information removed.
But what happens if you misplace the original title? Well, the DMVV can issue a duplicate title. Receiving a duplicate title is as simple as visiting your local DMV and filling out duplicate title paperwork. This also includes appropriate title fees.
How to Transfer a Car Title?
Are you considering selling your car or gifting it to a family member? In either case, the title has to be legally transferred to the name of the new owner in order for them to retain the ownership of the vehicle.
The process of vehicle title transfer varies from one state to the next. Some steps are, however, typically the same. While it would be convenient to simply deliver the title to the new owner and call it a day, that, unfortunately, isn’t the case.
To ensure that the transfer is legal and thus successful, you must carefully adhere to these procedures and any extra guidelines established by your state. Maintaining a constant awareness of changes as they occur will likely make your life much simpler in the long term.
This calls for obtaining a new title whenever you move to a new state or trade in your car. This is particularly true when the car is passed from one family member to another. Here’s everything you need to know about car title transfers:
Make Sure That the Title is Transferrable
Before you transfer or sell your car to a family member or a third party, you need to determine whether or not the title is transferrable. Start by looking at the title of your car. Whose name is listed on it? If it is truly yours and yours alone, the title can be quickly transferred with the help of the buyer.
If a bank or lender’s name appears on the title, however, your title can still typically be transferred, albeit with a little extra work on your part. The same applies if you jointly own the vehicle with another person, such as your spouse.
Keep in mind that in this situation, all parties must consent for the title to be transferred. The only exception would be if the title said that the owner is either you or someone else. In most circumstances, the “or” clause allows the title to be transferred with the consent of just one owner.
Simple Title Transfers
If you’re the sole owner of the vehicle or co-own the vehicle with your spouse, keep in mind that both parties must agree on the transfer—unless there’s an “or” clause. In simple title transfers, all you need to do is fill out the Certificate of Title.
The buyer or the gift recipient (in case you’re gifting a car) can take the title to a nearby DMV office to officially transfer ownership after you have completed and signed the certificate. The steps the buyer or recipient must take will differ from state to state, but they are typically simple and easy to understand.
Things become a bit more complicated if the title transfer involves surviving spouses or deceased owners/co-owners. In that case, the surviving spouse has to apply to transfer the ownership to themselves and provide a copy of the death certificate of the decedent. This has to be done before the transfer of title to a family member or third party.
Lender-involved Title Transfers
If you bought a car on loan, your title probably has a lien on it. If you’re still making payments to the bank or another lender, you’ll need to contact the lender directly and discuss the possibilities for title transfer.
In some circumstances, you might need to pay off the debt entirely before you can lawfully transfer the title. In other cases, you might be able to get the new owner to assume the lien. This mostly depends on state laws and regulations, as well as different lenders.
Dealership-involved Title Transfers
You might prefer to transfer your title to a car dealership in particular circumstances rather than a specific person. Be advised that the dealer might not change the name on the title until after the vehicle has been sold in this situation, depending on where you live.
However, you must let your local DMV know that you are selling the vehicle to a dealership to avoid confusion, accountability issues, and other issues. To confirm the transfer and release you from responsibility as the vehicle’s owner, you might be required to complete and submit a Vehicle Transfer Notification form.
Transferring your vehicle’s title to a resident of the same state as you are a simple procedure. Simply following the state’s laws is all that is required of the buyer and seller. However, there are typically a few extra hurdles to clear when the buyer is based outside of the state, like submitting and validating your vehicle identification number (VIN).
Although the process can be a little tiresome, keep in mind that it is done to avoid car theft and fraud. Since rules differ from state to state, you should always check with your local DMV office if you have any questions.
You might need to contact the DMV in the buyer’s or recipient’s state of residence when dealing with online transfers or other transactions where you don’t actually deal with the buyer or recipient face to face.
Depending on the state and the type of transaction, you may need different paperwork. In contrast to transferring a vehicle out of state, inheriting one, or purchasing one that has never been titled, you could need different paperwork for a private party transaction.
Here is a summary of different documentation you could require; for details regarding your particular circumstance, see the DMV website for your state:
- Government-issued Photo ID
- Proof of name change
- Signed title and registration application
- Signed and notarized car title (including odometer reading)
- Lien letter of release (if necessary)
How To Transfer the Title to a Family Member
Selling your car to a family member is straightforward but differs slightly if you’re gifting your car. It’s also a good idea to make sure that your family has all of the necessary paperwork.
Selling Your Car to a Family Member
When selling a car to your family members, you have to assign it a fair purchase price equal to its fair market value. If you set the price too low, the IRS might interpret it as an attempt to evade sales tax.
Next, fill out the Bill of Sale, accurately listing all the necessary information, including the odometer reading. Check your license plate information; in most states, the plates belong to you, so make sure to remove them from the vehicle before selling it.
Have the buyer—in this case, your family member—deliver the vehicle, Bill of Sale, and signed title to the DMV so that the office can formally transfer the vehicle. The DMV will ask them to pay the sales taxes on the car, as well as title transfer fees, new license plates, and registration fees.
Though this is a very simple procedure, it can become more complicated if your vehicle is financed. We’ll discuss this more in a later segment of this guide.
Gifting Your Car to a Family Member
A gift transfer also implies a trip to the DMV for title transfer, new license plates, and registration. Since you’re not selling the car but gifting it, the state might issue a Gift Transfer Affidavit title on the vehicle until the transfer is complete. However, some states still use a Bill of Sale for gift transfers, inc which case you should list the sales price at $0.
Next, you should determine your tax obligations. These vary from state to state. In some states, the recipient enjoys tax exemptions, while in others, they might be obliged to pay the tax on the assessed fair market value of the gift. The rest of the process is pretty much the same as selling the car.
Both you and the recipient need to sign the title and fill out the odometer disclosure statement. After that, your family member must take the forms and the title to the DMV. Transfer, registration, and license plate fees still apply.
Swapping Cars with Family Members
There are several ways to swap cars with family members. The first one entails title transfers as gifts, in which case you need to transfer your car’s title to your family member and vice versa. This implies all the necessary paperwork and processing fees.
However, there’s an alternative. You can physically exchange the vehicles, keep the individual ownerships intact, and simply list each other as the registered keepers of each other’s vehicles. In most cases, this action needs to be notarized, as you’re still the legal owner of your vehicle, despite it being used by your family member.
This also implies that you’re legally responsible for the vehicle, which is why this isn’t such a great option. Nonetheless, it’s pretty common among immediate family members.
Can I Transfer a Car Title While I Have a Title Loan?
A title loan usually includes a lien that the lender puts on the car, implying that the lender actually owns the car until the debt has been settled. For all intents and purposes, you still legally own the car unless you plan on selling or gifting your vehicle.
Lenders aren’t the only ones able to place liens on cars—mechanics, tow truck drivers, and storage facilities can also do so for unpaid debts. And though it may not feel good to know that someone else has the authority to hold ownership documents over your head for something you own, this situation occurs more frequently than you might imagine.
You can still sell your present car even if you’re still making payments on it. For instance, many people outgrow sports cars once they have families. Selling a car with a lien is possible, but it’s more difficult than a regular auto sale, particularly if you want to sell to a private buyer to make the most money.
Even that is achievable, especially if you have patience and the right knowledge. Selling a car with a lien on it is something you can do in a number of ways. Here are some suggestions to make the procedure go as smoothly as possible:
Talk to Your Lender
Lenders usually don’t typically agree with sales while you still owe the loan. However, not all lenders are the same, and some are willing to negotiate a deal and transfer the lien along with the title. Others, however, might require you to repay the loan before transferring the title. But, for the purpose of this guide, let’s assume that the lender is willing to transfer the lien and the title.
Dealership or Private Sale?
This is a tough call; private sales are more profitable, but not all buyers will purchase a vehicle with a lien. Selling the vehicle to a dealership is less profitable but more straightforward. Dealerships are particularly prepared to manage these kinds of complicated deals.
They are accustomed to working with lending organizations and, in certain situations, may already have a rapport with that lender, mechanic, or towing company. They buy the car from you and pay off the lien.
Set a Meeting Between Interested Parties
If a towing company or mechanic has a lien on your vehicle, schedule a meeting with all parties involved to sign the title and, if the buyer is willing to pay, possibly satisfy the lienholder’s debt. No matter what, the title must be obtained by the buyer in order to transfer ownership of the car. If the buyer takes the lien’s debt, they must also transfer that obligation.
In summary, transferring the title between family members is pretty straightforward. However, if the title has a lien, the final decision falls on the lienholder, which might require you to pay off the debt or the buyer/recipient to assume the loan repayment in your stead.
If you want to learn more about car title loans, visit 5 Star Car Title Loans, or call us at (888) 309 0994. The company specializes in car title loans and installment loans online and will do its best to meet your needs and even help you on your journey toward financial well-being.