Rateworks auto loan refinance
June 19, 2024

The Importance of a Clean Title When Purchasing a Car

When buying a car, ensuring it has a clean title is one of the most critical steps in the purchasing process.

What is a clean title for a car?
Written by

Matthew Oliver

When was the last time you went shopping for a car? Whether you’re looking for a new car or one that is new-to-you—aka used—its a process that is known for causing your brow to sweat, your heart to palpitate, and your nerves to get on edge. And when it comes to buying a used car, all of this is amped up, especially when worrying about inadvertently purchasing a defective vehicle—the dreaded “lemon.”

Unfortunately, buying a lemon does happen. Plus, you can find them anywhere—an article published a few years back by PR Newswire suggests that 65% of lemons are purchased from car dealers. Only 25% of lemons come from a private party. So, what can you do to protect yourself? It all starts with a clean car title.

Your team at RateWorks, experts in the car loan refinancing space, have put together some information that you need to know to protect yourself during your next vehicle purchase.

How do you find out if a car has a clean title?

What is a Clean Title?

So, just what is a clean title, anyway? A clean title basically means that a car has never been declared a total loss by an insurance company due to severe damage or theft. This title confirms that the vehicle has not undergone any major incidents that would significantly impact its structural or operational integrity. In the eyes of the law and most buyers, a clean title signifies that the car is in sound condition, free from any legal claims like liens or levies from lenders or government agencies.

However, it's important to understand that a clean title does not guarantee the car is free from all problems. Some issues can still linger beneath the surface. For instance, a car might have undergone significant repairs that were well done enough to avoid branding on the title. Issues like minor accidents or repairs that don’t meet the insurance threshold for a salvage title can often go unreported. Additionally, some unscrupulous dealers might even tamper with the odometer or hide the history of regular maintenance and minor collisions to make a sale.

Therefore, while a clean title is a good sign, it's not an absolute assurance of the car's condition. Prospective buyers should conduct a thorough inspection and consider obtaining a vehicle history report for added peace of mind. This report can provide detailed information about the car's past, including any hidden issues that might not affect the title status but could influence your decision to buy.

What is a Branded Title or Salvage Title Car?

Earlier, you saw us use the term branding and we’re sure you are wondering what we mean by that. When we mention a "branded" or "salvage" title, we're talking about the same thing. These terms refer to cars that have been declared a total loss by an insurance company. This could happen for several reasons, such as:

  • Severe accident damage
  • Flood damage
  • Theft recovery where the car was missing long enough to be considered lost by insurance standards

In such cases, if the vehicle is later recovered or repaired, it's marked with a salvage title to indicate its history.

You might wonder why anyone would sell or buy a car with a salvage title. Well, these cars often find new life in various ways. Some are purchased by repair enthusiasts or mechanics who want to rebuild them for personal use or to sell once they are restored. Others buy these cars to strip them for valuable parts that can be used in repairing other vehicles. 

However, there's a riskier side to this market. Some less conscientious sellers might attempt to sell a salvage title car to an unsuspecting buyer without disclosing its history, hoping to profit quickly on a vehicle that might still have hidden problems. 

Be sure to inquire about the nature of a car’s title when purchasing. If the car has a salvage title, make sure to get a clear and written explanation of its history and current condition from the dealer. This transparency helps you make an informed decision. And, remember that you can visit the National Motor Vehicle Title Information System (NMVTIS) website to get an auto history report, including title, insurance loss, and salvage information

Securing potential auto refinancing for a car with a salvage title can be extremely challenging, if not impossible. Since the vehicle has been labeled as a total loss, proving any remaining equity in the car is difficult. Lenders are typically hesitant to offer refinancing options for these vehicles due to the increased risk associated with their diminished value.

Why is it important for a car to have a clean title?

Do Your Homework—Check for a Clean Title—Before Buying

Whether you are buying a new car or a used one, our message is the same—do your homework in advance. If purchasing from a dealer, be sure to check out ratings and reviews, and while you are at it, see what your local Better Business Bureau has to say. And when purchasing from a private party, make sure you do a thorough test drive—not just a quick jaunt up and down a suburban street—to see how the car drives.

Ask the seller questions, such as:

  • Can you provide the vehicle’s complete maintenance history?
  • Has the car ever been involved in any accidents?
  • Are there any ongoing issues or repairs needed?
  • Why are you selling the car?
  • Is the title of the car clean, or has it been branded in any way?

The more homework you do upfront researching the seller, the more thorough the test drive, and the more questions you ask, will ultimately help you lessen any risks.

Looking to refinance your car? Complete your application or contact the RateWorks team today.