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Bottom Line Up Front

  • Buying a car with a clean title can give you confidence in your purchase.
  • A clean title means the car hasn’t been significantly damaged, salvaged or rebuilt.
  • Watch out for car title problems, like salvage titles or odometer.

Time to Read

5 minutes

June 21, 2024

If you’re in the market for your first car, there are many terms and concepts you’ll want to be familiar with. One of the most important is a “clean title.” The status of a car title has a huge impact on the value of a car—and it can affect your ability to sell it in the future. 

Let’s take a closer look at why a clean title matters and some car title red flags to look out for.

What Is a Car Title?

A vehicle “title” is a legal document that establishes ownership of a vehicle. This document will typically include the car’s information, including:

  • Vehicle Identification Number (VIN)
  • Car’s make, model and year
  • Odometer reading on the date the title was issued
  • Owner name and address

The car's title serves as a comprehensive legal record of the vehicle's history, including ownership, accidents and its current condition. Typically, it will have different title statuses such as “clean” or “branded.” The status impacts the car's value, insurance and ability to be sold.

You’ll receive a car title when you pay for a car in full, pay off your auto loan or are given the car as a gift. Understanding the variety of vehicle titles, such as clean titles and branded titles like salvage or rebuilt, is crucial as it affects the implications of ownership, insurance and the vehicle's value.

If you finance your vehicle, the lender may place a lien on the title. This means that the lender is the vehicle’s legal owner until you pay off the loan. Once your loan is paid, you can transfer the car’s title into your name to prove that you own it.

What Is a Clean Title vs. a Branded Title?

There are different types of car titles to be aware of, including clean titles and various title brands that indicate a vehicle's history of damage or other issues.

When the title is “clean,” it means the vehicle is owned outright. It doesn’t have any liens or disputes that could affect a transfer of ownership.

A clean title contrasts sharply with a branded title, which signals that a vehicle has undergone significant damage or has been subject to conditions like fire damage, fleet use, theft/vandalism, hail or flood damage. This means the car hasn’t been damaged to the point of needing to be rebuilt or salvaged.

Why Is It Important to Have a Car With a Clean Title?

When shopping for a car, you should look for a vehicle that has a clean title. New cars have clean titles by default. Used cars, on the other hand, might have a different title type. Here are the major benefits of owning a clean-titled car:

  • Ownership confirmation. A clean title provides clear evidence that the person selling the car is the rightful owner. You’re not purchasing a vehicle that could be claimed by someone else due to unresolved legal or financial issues.
  • Smoother transactions. Buying or selling a car with a clean title is typically straightforward. You won’t encounter unexpected hurdles due to unresolved issues that arise from a title with problems.
  • Resale value. If you decide to sell your car in the future, a clean title improves its resale value. Buyers want a vehicle with a clean title, and they’ll pay more for it.
  • Loan approval. When financing a vehicle purchase, lenders often require a clean title as collateral for the loan. A clean title can significantly affect the terms and approval process of a car loan, ensuring better conditions and a smoother transaction. If the title has any issues, it could complicate the loan approval process or lead to less-favorable terms.
  • Reduced repair costs. A clean title shows that the car hasn’t suffered extensive damage in the past. This means there shouldn’t be hidden damage or poorly done repairs that could cost you later.

How to Identify a Clean Title

It’s important to do your research when buying a car—including looking into the title and the vehicle's history. How do you know if a title is clean or not? Use these tips:

  • Request the car title. If you’re considering a car for purchase, ask the seller to provide the title. Look for any signs of liens or discrepancies in the ownership details.
  • Inspect the physical title. Examine the physical title document closely. Check for any alterations, erasures or signs of tampering. These could be red flags.
  • Check the car title history. You can use services like CARFAX® to obtain a vehicle history report. This report provides valuable information about the car’s title history, accident history and more. Look for any indications of salvage titles, flood damage or title issues.
  • Identify lienholders. If the title shows a lienholder, there’s an outstanding loan on the vehicle. This isn’t necessarily a bad thing. However, ensure the seller can provide proof that the loan has been paid off before finalizing your purchase.
  • VIN check. Verify that the VIN on the title matches the VIN on the car. Any discrepancies could indicate problems.

Title Problems and Red Flags to Look Out For

Not all used cars come with clean titles. Here are some red flags to be aware of:

Red Flags

Salvage title

When a car is severely damaged from an accident, fire or flood, it’s typically given a salvage title. This means that an insurance company has deemed the vehicle a total loss—the cost of repairs outweighs the car’s value. A salvage car with a salvage title means it cannot be legally driven, insured or registered until it undergoes significant repairs. While some salvage-title vehicles can be repaired and put back on the road, they often come with a reduced value and potential safety concerns.

Rebuilt title

A rebuilt title is given to a previously damaged vehicle, often a salvage car, that has been repaired and deemed safe by a certified mechanic or inspector. Vehicles with rebuilt titles have undergone extensive repairs after being declared a total loss and can be insured and driven again. However, buyers should be cautious due to potential financing and insuring difficulties, as well as the need for thorough inspection of the vehicle's history and previous repairs. Some rebuilt-title cars can be reliable. However, they may have a lower resale value and can be more challenging to insure.

Lemon title

A lemon title is assigned to a car that has had recurring issues that haven’t been fixed—even after multiple repair attempts. It’s a sign that the car has significant manufacturing defects.

Odometer tampering

A clean title should reflect the accurate mileage of the vehicle. Some sellers commit odometer fraud, where the mileage is intentionally rolled back to increase the car’s apparent value. This is a serious offense that can be costly. Look for discrepancies between the odometer, the title’s odometer reading and the car’s physical condition.

Title brand

The term 'title brand' indicates specific issues with a vehicle, such as salvage, flood, junk or rebuilt titles. It's crucial to understand what each title brand means for the vehicle's history, safety and value.

Title washing

Be wary of title washing, an illegal process used to remove negative title brands like 'salvaged' or 'rebuilt' from a vehicle's title. This fraudulent practice can involve transporting vehicles between states with differing title laws and forging documents, posing significant risks to consumers and lenders by over-valuing vehicles.

Buy Your Next Car With Peace of Mind

Understanding the significance of a clean title is an important part of responsible car ownership. Above all else, a clean title gives you peace of mind.

Navy Federal is here to help during your next car search. Check out our Car Buying Center to find everything you need to research, finance, buy, protect and enjoy your next car. 

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This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.