Certificates of Title are issued by states to show who the current owner of a vehicle is, according to the state. The Title is considered "evidence of ownership" but is not the be-all or end-all of the discussion. In a typical new car setting, a car is sold at a dealer. The dealer fills out an Application for Title in the name of the buyer and sends it to the state. The state issues the new title and sends it to the buyer. If there is a lender who has put up money for the purchase, their information will be included in the title as Lienholder. This will prevent the titled owner of the vehicle from selling the car without paying off the underlying loan first.
Most states allow for the transfer of title for a used car by having the seller fill out some information on the title itself and then submitting it to the state. The state then issues a new title to the buyer of the car. Each time a title is issued by the state, a copy is kept of the old title and the new title, recording each owner and change in ownership over the life of a car.
The Title contains a description of the car, the Vehicle Identification Number and details of the owner: name and address and so forth. Titles often list the reported mileage as it was reported in the title application and will often designate it as "Actual," "Not Actual," or something to the effect of, "Mileage Exceeds Mechanical Limits" of the car.
One of the first things that can cause problems is if the VIN on the title does not match the VIN on the car. There is a VIN tag visible near the A-pillar at the base of the windshield in front of the driver. The VIN is also on a few other parts of the car and they should all match. If they don't, you may have bought a cloned car which is a story for another day. And if the VIN on the title does not match the one on the car at all, this is more than a typo. It could mean that the car you are looking at is owned by someone else.
I get a lot of phone calls about mileage discrepancies. People shop for a used car and the seller tells them the odometer is accurate. After all the paperwork is completed, they receive a title which shows "Not Actual" mileage or "Mileage Unknown." This is one reason I advise all used car buyers to inspect the title before you agree on a price. And, do not exchange any money with the seller until you have seen them fill out the old title so you can see how it is going to look when they hand it over.
"Salvage" titles and "Rebuilt Salvage" titles cause much confusion. When a vehicle has sustained a certain amount of damage and an insurance company deems it unfixable, it will often be sold at an auction and given a "Salvage" title. While these cars might be good buys for the buyer who enjoys a challenge, these car cannot be registered and driven until they are rebuilt. This title designation will often be at the top of the title, dead center, and the title will often be a different color to warn the buyer of the status.
A vehicle that is "Rebuilt Salvage" gets this designation after it has been rebuilt and inspected by a state inspector. This is important to know: In Michigan and in other states, the "Rebuilt Salvage" designation DOES NOT MEAN the car is roadworthy or even safe to drive. It merely means that the car is complete and the replacement parts were not stolen. The inspection often does not even involve driving the car. I have spoken to many disappointed buyers of rebuilt salvage vehicles who were surprised to learn this.
What about other title brands, like "Lemon Law Buyback"? Turns out that only a handful of states use that designation. So a car can be bought back under the lemon law in a state without title branding – like Michigan – and buyers down the road are none the wiser. And if the car is bought back in a state with title branding, an owner can simply take it to another state, retitle it and get a non-branded title for it.
There are also other title brands, like "Flood Vehicle." Which is pretty much what you would guess. The key is to know what the clean title looks like in your state. Then, when you are car shopping, ask to see the title to the car you are buying before you agree on a price or agree to buy the car. Watch it as it is filled out and only hand over your cash when you see that the title process appears to be on the up and up. If someone presents you with a car title and it is branded in some odd way you have not heard of and not mentioned here? Run. Or call someone you trust who knows about car titles and ask. I get too many of these calls from people who have bought a car and did not see the title until later. And are just finding out that their car, which will not go in a straight line, is "Rebuilt Salvage".
Steve Lehto is a writer and from Michigan. He specializes in Lemon Law and frequently writes about cars and the law. His most recent books include Preston Tucker and His Battle to Build the Car of Tomorrow, and Dodge Daytona and Plymouth Superbird: Design, Development, Production and Competition. He also has a where he talks about these things.