The Expert Podcast

Purchasing a motor vehicle is the most common large consumer purchase that's made in the United States. Almost everybody has purchased a vehicle in their lifetime, whether it's from a private party, a dealer, or some other seller—maybe online, maybe eBay, maybe Craigslist. Unlike purchasing a home, which is not as common, most people maybe will purchase a home once or twice in their life, and some people never purchase a piece of real estate. But almost everybody purchases a vehicle, and unlike purchasing a shirt at Walmart, it's a significant amount of money that we're talking about.

Now, most vehicles are purchased through a licensed dealer. You're going to see dealerships advertising cars and displaying cars in your hometown, and those dealerships are all licensed by some licensing authority in your state. Typically, it's the Department of Motor Vehicles, sometimes there's a separate licensing division in your state. The important thing to be aware of with licensing is it provides you some protection and recourse should something go wrong with the purchase.

The most important thing about the purchase of a vehicle is getting the title to the vehicle. There are other problems that happen sometimes, such as vehicle condition. You may buy a car that's a lemon or one that is mechanically defective, especially used cars. These are maybe more common, but they don't have as much oversight from the licensing division. The most important thing about the licensing division is getting a title and ensuring there is no improper advertising, misleading advertising, or fraudulent advertising.

Today we're going to talk about getting a title because, in theory, it shouldn't be that hard. You go to a dealership, give them money, and they give you the title. But more frequently, dealers are having problems getting a title to the buyer. Why is that? You would think that a dealer would know what to do about getting a title. They're not selling stolen cars or cars they don't legally own, but there are big title problems. Here's an example of a large-scale title problem: you may have heard that the retailer Carvana is having problems all over the country in all 50 states with getting titles for their consumers. In Colorado, there was an interview with a department of revenue, which is the division in that state that oversees car dealers, saying it's a really important issue. Some of these online companies are moving cars so quickly that they haven't done their due diligence behind the scenes to make sure they have a clear title before selling a car. This person said it’s a systematic issue with Carvana. What that means is it's happening more frequently. His agency received complaints from half the 64 counties in the state about Carvana's paperwork problems.

As an online disruptor-type car seller, Carvana has recreated the dealership retailing model to allow sales all over the country. They deliver cars, and having that wider range sometimes makes it difficult to get titles in people's hands. So, first, we're going to talk about what your recourse is if you have a title problem, and then we're going to talk about why it happens. In every state, there is a complaint form that you can file with the licensing board. Here is a complaint form example from Oregon. We'll look at one also from Texas. If you notice on each of these forms, it tells you that one of the questions is "No title received." On the Texas form, it asks, "Did you receive a paper tag?" or "How many paper tags did you receive?" or "Did you get your metal plates?" The reason why is that while the title is in process, a dealer is allowed to issue paper temporary tags.

You've seen them on the back of cars. That is a temporary registration issued to allow you to drive your car on the road before your final title is issued by the Department of Motor Vehicles or the licensing division. If the dealership is having problems getting the title transferred to you, they might give you a second paper tag. Each paper tag is only usable for 30, sometimes 45, days. So if they're running into delays, they might issue a second paper tag. Well, that's not allowed—you’re not allowed to give a second tag for the same vehicle. Some online retailers, like Carvana, are having difficulty getting titles, but we're not trying to pick on them—other retailers have the same problem.

If that's the case, it's important to file whatever complaint form is available in your state to get the ball rolling on an investigation. Government agencies don't always work at the speed of light; they do a great job, but it may take them a while. So the sooner you get your investigation in, the sooner they'll get around to it. The complaint form will ask you for information like: was it a dealer, was it an unlicensed dealer, your contact information, and the vehicle information. You’ll notice this form from Oregon has a place for five vehicles. Maybe you had problems with more than one, and you can check off a box like "No title received" or "No registration received" or "Dealer did not provide me with documents to obtain title." A lot of this has to do with title registration.

There may be other reasons to complain about a dealer, but those are the main ones. Get this form filled out and submitted as soon as possible to get the enforcement division on your side as fast as possible. Here's a checkbox for "Dealer has not transferred title to my name and I have not received plates." This explains part of the agreement you have with the dealer: when you give them money, not only do they give you the car and the keys, but they have to transfer the ownership by title. If they don't, it puts you in a bad spot because you can’t register it, you can’t drive it, and if you have a loan on it with a bank, the bank’s going to be looking for the title. They might cancel your loan or convert it to a personal loan, which will have a higher interest rate.

The first thing to do is get your form in as soon as possible to the enforcement division. Then, keep in contact with the dealer. Give them the benefit of the doubt; let them try to work on your title, but tell them it's important. Keep the pressure on. Don't let them forget about your title problem, and keep communicating with them. So, what's going on with titles behind the scenes? From conversations with dealers, auctions, lenders, and DMV employees, the picture is very clear. As these online retailers are expanding very quickly and selling massive volumes of vehicles as fast as they can, they're sometimes overlooking the details of vehicle title documents.

An established dealer that has been around for 20 or 30 years, with a location that sells to the local community, knows how to do titles. They’ve been doing it for years, and it's a tricky business. An online retailer, like Carvana, who came from outside the car business and doesn’t know the mechanics of it, sometimes isn’t aware of how difficult title paperwork is. They just figure, well, we'll get the car here, park it over here, put it online, sell it, boom—keep the cars moving. If the company is a public one with shareholders, they are kind of obligated to sell cars at a high volume to meet shareholder expectations. The companies do everything they can to move more cars, even if they don’t have the title yet or aren’t sure if they’re going to get the title.

So, where do these cars come from? Well, if you're an online retailer like Carvana, who does not sell new cars, you don't get a lot of trade-in vehicles. If you’re a new car dealer, like a Honda dealer, most people who buy a new Honda will trade in an older vehicle. But Carvana buys every single one of its used cars from somewhere, most of which are auto auctions. When you buy a car from an auto auction, the seller may be a rent-a-car company, a bank that repossessed the car, or another dealer who took a trade-in they don't want to put on their lot. In many cases, the title is not physically at the auction on the day of the sale. The seller just ships the car and mails the title later.

A lot of times, a dealer will hold the title in their drawer. They'll bring the car to the auction, and once it’s sold, they process the title. Sometimes, the dealer doesn’t even have the title yet because they paid off a loan for the customer who traded it in and are waiting for it from the bank. It's like a game of musical chairs, and each transfer of the title may take time and sometimes get lost in the shuffle. We estimate that 10 to 15 percent, maybe 20 percent, of titles that go through the auctions get lost, damaged, or misplaced. Sometimes they get lost in the mail or don’t get delivered properly, especially when a company like Carvana has multiple locations.

In the meantime, the buyer now has a car they’re driving around but doesn’t have the title or registration. Their bank is bugging them about the loan, and without the title, it’s not secured. So, what does that mean for buyers? Well, number one, if you're buying a vehicle, ask about the location of the title before you give money or sign paperwork. If they have the title, they should be able to show it to you. Second, if you’ve purchased a vehicle within a week of purchase, ask the dealer if your title application has been submitted to the DMV. If it has, good—give me your receipt and show me a copy of the application. If after 30 days you don’t see permanent metal plates or your title come in the mail, check with the titling division of your state, the DMV directly.

Don’t take the dealer's word for it. Go to the DMV yourself and say, “Look, my name is so-and-so, I bought this vehicle, here’s my purchase order, here’s my ID—can you tell me if a title’s in the works?” They’ll either tell you, "Yeah, it's applied for, we're just running late," which is legitimate, or they might say, "We have no idea