For independent used dealers, understanding the different types of vehicle titles is essential to your businesses success. That’s because each type of title comes with its own set of considerations and processes. Let’s take a closer look at the common titles you’re likely to encounter and how to manage them.
Clean Title
Put simply, a clean title is the ideal kind of type of title a vehicle can have. That’s because it means the car hasn’t been in a bad accident and hasn’t been declared a salvage or rebuilt vehicle. Dealers can buy and sell cars with clean titles to customers, wholesalers, and salvage dealers without any additional, title-related restrictions.
Salvage Title
A salvage title is given to a vehicle that has been severely damaged, often to the point where the cost of repairs exceeds a certain percentage of its value. These types of vehicle titles can happen for a variety of reasons, such as:
- Flood damage (sometimes issued a “flood-damaged title”)
- Hail damage
- Theft recovery
- Vandalism
If a dealer believes the damaged car can be rebuilt, they may purchase salvage vehicles at auction or from private sellers. To rebuild a salvage vehicle, dealers must repair it to meet state safety standards, pass an inspection, and apply for a rebuilt title.
>> Read “3 ways floorplan financing makes auto salvage purchasing easier” now!
Branded Titles vs Salvage Title
We often hear the question “What is a branded title?” A branded title is a vehicle title that carries a permanent designation indicating that the vehicle has experienced a significant event. They can include salvage titles like flood damage or hail damage. However, a branded title simply notes that a vehicle has been subject to damages at some point in the car’s lifetime. Once the necessary repairs have been made, dealers or owners can get a rebranded title indicating it’s now approved to be driven on public roads.
Branded titles are important for dealers to recognize because they can significantly impact a vehicle’s value and desirability. While vehicles with branded titles can be legally sold, dealers must disclose the brand to potential buyers and may need to comply with additional regulations depending on the state.
Rebuilt Title
Once a salvage vehicle has been repaired and inspected, dealers can apply for a rebuilt title. This title indicates that the vehicle was previously salvaged but has been repaired and inspected to meet state safety standards.
As you might expect, the requirements for obtaining a rebuilt title vary from state to state. Some states require that the vehicle is inspected by a state-licensed inspector before the title can be issued, while others do not. When you comply with the state-specific regulations, cars with rebuilt titles can be legally driven on public roads and sold to customers.
Non-Repairable Title
Sometimes salvage cars are simply past the point of repair. In these instances, vehicles may be given a non-repairable title (also known in some states as “junk titles” or “parts only titles”). This designation means it cannot be rebuilt, retitled, or ever driven on public roads again. Dealers may be allowed to sell these vehicles for parts or scrap, but never to customers who want to drive it off the lot.
Export Title
An export title is issued when a vehicle is intended to be permanently exported from the United States. It indicates that the car does not meet U.S. safety or emission standards and cannot be registered or driven on public roads in the country. Dealers who specialize in exporting vehicles may purchase cars with export titles and sell them to buyers in other countries.
Repossessed Title
When a borrower defaults on a car loan, the lender may repossess the vehicle and issue a repossessed title. This title indicates that the car was previously owned by someone who failed to make their loan payments. Dealers can purchase repossessed vehicles at auction or directly from lenders.
Junk Title
A junk title designates a vehicle as not roadworthy and suitable only for parts or scrap. As with the other titles in this list, each state has its own criteria for junk titles, but it generally means the car has been very badly damaged, abandoned, or declared a total loss by an insurance company. Dealers who purchase cars with junk titles can sell the parts or scrap the metal, but they cannot sell them as whole, drivable vehicles.
Lemon Title
Lemons are cars with manufacturing defects or malfunctions that impact the car’s use, performance, safety, or value. In order to protect buyers, Lemon Laws have been passed in every state within the U.S., requiring manufacturers to repair the defect within a reasonable amount of time, or repurchase the vehicle altogether.
The exact definition for a Lemon varies in each state. However, once a car is issued a Lemon Title, dealers will need to disclose the lemon history to customers and comply with any buyback or replacement requirements.
For example, under Indiana’s Lemon Law, dealers initially reselling any vehicle repurchased or replaced under the Lemon Law are required to provide conspicuous written disclosure specified under Indiana Law, as well as a 12-month or 12,000 mile manufacturer’s warranty.
How a dealer floorplan from AFC simplifies title management
With so many requirements, restrictions, and rules around the different types of vehicle titles, one thing is clear: title management is no afterthought. Compliance with title laws is essential for every car you sell.
But, as an independent dealer, we also know that your time is your most valuable resource. And with AFC’s obsession with helping dealers bring their business dreams to life, we are committed to maximizing your time.
With an AFC dealer floorplan, title management stops being a time suck. Our Centralized Title Processing Team makes it easier than ever to keep track of your vehicle titles. By taking on the burden of title processing, AFC gives you a single point of contact for all title-related questions and issues. That means no more chasing titles or coordinating with multiple parties, as well as freedom from manual tasks with online title tracking, streamlined title releases, and dedicated support from our title experts.
Even more, with your dedicated local relationship managers in the field where you live and work, you can rest assured that our teams have an intimate understanding of the vehicles on your floorplan line of credit. And with additional services like lien holder payoff and access to all your title documents on the AFCDealer platform, we know how to make title management something you can leverage in your dealership’s growth.
Disclaimers:
Please note that vehicle titling statutes vary from state to state. The information provided here may not be applicable to your specific state. It is recommended that you consult with your local Department of Motor Vehicles (DMV) or seek legal advice to ensure compliance with the titling laws in your state.
Descriptions of AFC floorplans are for illustrative purposes only. Terms of AFC floorplan financing are subject to a final written agreement acceptable with AFC. AFC does not guarantee any results for floorplan financing and examples are for illustrative purposes only. Dealers 4should consult their own advisors to make independent business decisions regarding floorplan financing.
“AFC” refers to Automotive Finance Corporation, Automotive Finance Canada Inc., and AFC Cal, LLC in their respective jurisdictions. All California transactions are through AFC Cal, LLC. California loans will be made pursuant to Department of Business Oversight California Finance Lenders License. Canadian transactions are through Automotive Finance Canada Inc.
