The Expert Podcast

So, what can you expect in the industry of vehicle titling for the year 2025? Obviously, with the new year, there are a lot of new rules, not a lot of new laws, and also some industry transformations that we'll be seeing in the coming year and years following. There are four major changes that will happen to the vehicle title process in the coming year. We'll talk about the four of them, and it's going to affect you as a vehicle owner, as maybe an automotive professional, as a lender, or as an auction. A lot of our clients are auctions.

The first one is going to be electronic titles. Through our coalition called EART with many other title providers and some other third-party vendors like DocuSign, CarMax, and Manheim Auto Auctions, we are now pursuing a transformation with the different DMVs in different states to have them convert to electronic titling in all 50 states. Now, it's a slow process; it's going to take a while to get there, but many states are already starting to implement technology. They're starting to implement rules that allow for things like electronic digital signatures. Look at everything else you do in life—buy a house, sign a mortgage—you can do it electronically, right? Use DocuSign e-signatures. DMVs don't normally allow this right now. Only one state really allows it.

We’re working on doing that and eliminating paper title documents. We're looking at electronic documents and working hard to get that done. In 2025, we expect that many states are going to start adopting more of these rules and allowing people to have electronic titles and records. This will make the process easier. You won't get as much of a runaround, you won't have to wait as long for titles to come in the mail, and you can get them almost instantaneously.

The second big change for vehicle titles is going to be Montana LLCs. Remember back years ago, there used to be the Vermont loophole. People used this Vermont loophole over and over to get titles from different states. That loophole, for many years—and we talked about it back starting five or six years ago—was really numbered because it wasn’t the preferred way of getting a title. Other states didn’t like it because you weren’t going through the right process. Eventually, they put enough pressure on the federal government and Vermont to stop doing it. The state of Vermont didn’t want to stop because they were getting a lot of money on sales tax.

Now, the loophole that some people are using is the Montana LLC loophole. What is that? Montana does not charge sales tax when you buy a vehicle. Some people are using this process to buy a vehicle without having to pay sales tax by putting the car in a corporation name in Montana. Why a corporation name? Most states don’t allow you—almost all states don’t allow you—to get a title from that state unless you are a resident of the state. You can’t just shop around and say, "Well, this state is easier or better for me to get a title; let me just get a title from there." It doesn’t work that way. You have to be a resident.

The workaround is you form a corporation in Montana, an LLC, you put the title in the name of the corporation, and you don’t pay tax. Technically, that’s not good because, even though you registered and titled it in Montana, you're driving it in your state. The tax isn’t just where you get the title; it’s where you use it, where you’re an owner. Whether or not that evades your taxes or not is between you and your taxing authority and revenue department. That’s more of a legal question than a title question.

You’ve got to watch out because many states are recognizing that this Montana LLC is a way people are using to evade taxes or avoid things like inspections or paperwork. Through our conversations with different states, they know this is happening. There are all kinds of fly-by-night companies advertising, "Yeah, we’ll do this Montana thing for you," and you're paying $500–$600 in fees to get a license plate from Montana. A lot of people are doing it on higher-end vehicles like luxury vehicles or motorhomes. These could cost $100,000–$200,000, and you could save $10,000–$15,000 in sales tax.

Now, there may be legitimate reasons to do it rather than just avoiding the sales tax. You might say, "Well, I’m going to do that because I’d rather have a title there and still pay the tax in your state." That’s fine, but that’s something that’s going to end pretty soon. Some states are starting to crack down. They’re sending out bulletins to law enforcement in the state, saying, "Look, if you see a Montana license plate in our state, run the plate. If it’s an LLC, pull that car over to see if the driver is on the LLC."

The third big change is salvage vehicles, Copart vehicles, and IAA auction vehicles. We started this conversation many years ago. Three or four years ago, most vehicles coming out of Copart and IAA are now more commonly designated as parts-only vehicles, not salvage. Some states call it a Certificate of Destruction, some states call it non-repairable, and others call it junk. The scary thing is some states don’t call it anything—they just don’t give you a title.

What does that mean? If the vehicle has been designated junk or parts-only, the VIN number is void. You can’t get a title, can’t get a registration. It’s a permanent cancellation of that vehicle as being eligible for on-road use. It can only be used for parts. A lot of people are buying these cars from Copart or IAA, not knowing what they’re getting into, only to find out later that they can’t get a title.