Depending on what state you live in, you may not get your title until you’ve paid off your auto loan. In fact, in most states the title goes to the leinholder, but a handful of states send you the title right away. It doesn’t usually take that long to get your car’s title in the mail after you complete your loan. Here’s the deal with vehicle titles, title-holding states, and car financing.
Getting Your Car Title
Your vehicle’s title has important information on it, such as the vehicle’s identification number (VIN), its mileage at the time of sale, its make and model, and date of manufacture.
A title’s purpose is to show who the legal owner of the property is, and you can’t sell a car legally without a title. Most lenders simply keep the title until you complete the loan since a financed vehicle is technically their property.
The state you live in determines who gets your car title at the start of your loan. After your purchase a vehicle, you typically get the car’s title in the mail within two to six weeks if you’re in a title-holding state. Title-holding states send the title to the owner/operator of the vehicle.
There are traditionally nine title-holding states: Arizona, Kentucky, Maryland, Michigan, Minnesota, New York, Oklahoma, South Dakota, and Wisconsin. However, due to a recent 2021 change in the way Michigan vehicle titles work, the state now holds the title to a vehicle purchased there until the loan is paid in full.
All of the other states are non-title-holding, which means the lender keeps the title until you complete your loan. When you finance a car, the institution that financed the vehicle gets its name on the title as the lienholder. In most states (there are 41 non-title-holding states), they also hold onto the title until you finish the loan.
Once you pay off everything you owe, the lender can remove their name and send you a copy of the title, or issue you a release of lien letter. You can take your release of lien letter to your Department of Motor Vehicles (DMV) or Secretary of State (SOS) to get a clean title with just your name on it. Getting a new title in your name typically takes around 30 days.
Additionally, since you can’t sell a financed vehicle without releasing the lien from the title, having the lender keep the title until the time comes to release the lien can be more convenient, since you won't have to worry about keeping track of the paperwork yourself.
Need to trade in a car without the title?
If you need to trade in your vehicle but your lender has the title, no worries, because the dealership can handle it. The dealer contacts the lender and they take care of the transfer of ownership themselves.
If you’re in a title-holding state and you simply can’t find the title or it got damaged, you can request a duplicate title from your local DMV or SOS. You usually need your Social Security number, the car’s VIN, and possibly the date of manufacture (which you can find on the vehicle itself). It may take a couple of weeks to get the title in the mail, depending on your home state’s regulations.
Once you have a fresh copy of your title, you're free to proceed with the sale or trade of your vehicle.
ACE Tip: Be aware that letting someone buy the car and not transferring the title right away could lead to trouble down the road if something happens to the vehicle, or there is an accident. If the car is still titled in your name you could be the one responsible for footing to bill even if you weren't involved. It's always a best practice to wait until you have the title in hand and ready to transfer before you sell.
