Car titles are vital documents defining legal ownership over a particular vehicle, whether it’s changing owners after a dealership purchase or a private sale. A car’s title is issued by the state’s Department of Motor Vehicles and is typically transferred to the new owner so they can register the vehicle in their name. But what happens if the original title isn’t available? This situation will require a bonded title. Below is an explanation of how dealers can navigate a more complex title change process.

How Bonded Titles Work

Transferring vehicle ownership from one individual to another requires both parties to sign the car’s title. Depending on the state, the title may also need to reflect a current odometer reading, and both parties will need to submit a bill of sale to verify their transaction. Titles also have a Vehicle Identification Number (VIN), a unique identifier for that specific vehicle¹.

A bonded title is a special type of title that’s necessary when the original is not present. This might happen if an individual seller lost the original or was selling an old vehicle that didn’t have a title. A bonded title might also be needed if the original is damaged and unreadable, or if it’s missing key information, such as the current owner.

If a buyer loses the title after it’s transferred to their name, a bonded title may not be required because the DMV can issue a replacement. The same is true if a buyer wasn’t given a title but has a Bill of Sale.

A bonded title is a way to guarantee someone’s ownership over a vehicle using a surety bond². A third party issues an agreement for a fee paid by the car owner, and the third party takes on the liability if the owner goes into debt or defaults on payments. If the ownership information on the title is purposefully incorrect, then the DMV could make a claim against the bond. In that case, the vehicle owner or entity taking the bond would be responsible for paying damages.

In other words, the party acquiring a bonded title takes on the financial and legal burden for information provided about vehicle ownership. Most states do allow bonded titles³.

How Are Bonded Titles Obtained?

The process for acquiring a bonded title can vary by state but usually requires filing a request with the DMV, including:

• Proof that the vehicle was either purchased or given to the owner rather than found
• Information about the vehicle
• Proof attempting to get a copy of the original car title

They may also ask for additional documentation and payment to cover taxes or fees.

The DMV will issue a bonded title after reviewing and approving the application and any supporting documents. The speed of this process will depend on the state’s requirements and the department’s workload, but it generally takes up to a month⁴.

Are Bonded Titles Permanent?

No, a bonded title doesn’t stay that way forever. Depending on the state, it will convert to a normal title after a certain number of years. Until that time, bonded titles could be challenged by a party claiming that the ownership is inaccurate. A person holding a bonded title will be able to sell their vehicle, but the buyer must be informed so they know the legal and financial responsibility they are taking on³.

ACV Makes Dealing With Titles Simple

ACV has a dedicated Title Department that takes care of the title process so you can focus on your customers and business. Busy dealers count on ACV Auctions to be the go-to marketplace for acquiring reliable used vehicles. We make it easy to learn about the vehicle’s history and condition, build a watch list for upcoming auctions, and get transparent pricing before you bid. Sign up today to start building your inventory.

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Sources

1. Valdes, R. (11/14/2022). Car Title Guide: Everything You Need to Know. Kelley Blue Book Retrieved on February 5, 2023, from https://www.kbb.com/car-advice/car-title-guide/

2. What is a Bonded Title? NFP.com (2/11/2023) https://www.nfp.com/property-and-casualty/surety/blog/what-is-a-bonded-title

3. What is a Bonded Title and Why is it Needed? Bonding Solutions. Retrieved on February 5, 2023, from https://bondingsolutions.com/what-is-a-bonded-title-and-why-do-you-need-one/

4. Corbett, J. (17 December 2021). What is a Bonded Title? Legal Match. Retrieved on February 5, 2023, from https://www.legalmatch.com/law-library/article/what-is-a-bonded-title.html

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