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The following is for informational purposes only

Vehicle Ownership: What Everyone Should Know

What Is a Car Title & How Does It Work?

Each time a seller signs the title to release the ownership of a vehicle, the new owner must take the signed title to a Department of Motor Vehicles (DMV) office, and the state will issue a new title and registration, as well as keeping both the old title and the new title on record. The title includes:

  • The Vehicle Identification Number (VIN);
  • The date on which it was sold for the first time;
  • Description of the vehicle (year, make, model);
  • Information about the owner (full name and address).

What Are The Different Types Of Car Titles?

  • Clean title – for cars that have never been deemed a complete loss or have never been in a reported accident.
  • Clear title – for motor-vehicles that were once considered "salvaged" but have been repaired and passed a state vehicle inspection to receive the clear title.
  • Lemon title - usually given when numerous dysfunctional parts can't be fixed, making the vehicle unsafe to operate.
  • Salvage title – for automobiles that have been either extensively repaired, stolen, or have sustained damage beyond 75% of their original value.
  • Bonded title – frequently chosen as a last resort for cars with major discrepancies in the initial proprietorship documents.
  • Flood or water damage title - involves serious electrical or mechanical issues caused by severe floods or thunderstorms. 
  • Rebuilt or reconstructed title – regularly issued by a licensed rebuilder, collision center, insurance company, or car body shop to salvage vehicles that have been completely repaired, being considered fit for the road and safe to drive again.
  • Odometer rollback title – a car gets this title if someone unlawfully tried to tamper its odometer reading and lower the high mileage to raise the selling price.
  • Junk or dismantled title – for severely-damaged cars that could never become roadworthy again. As no repairs could reinstate them, in general, they're sold to junkyards for their parts or as scrap metal.
  • Lien title – when the car's registered titleholder doesn't really own the car because they still owe money on the car loan, therefore the lender has rights over the vehicle as well.

How Does a Car Title Lien Stay?

auto ownership

Unpaid liens show up on a credit report for 10 years after filing. After it's been paid off, the released lien could still stay for up to 7 years on the credit history.

How Do I Get a Lien Removed From Car Title?

Removing a lien starts with paying off the car loan or other pending debts linked to your vehicle. Next, the lienholder or the bank must fill in the right section of the motor vehicle title and send it to you. Once received, you have to take it or mail it to a DMV Full Service Office. The lienholder will be removed and you will now have a "clear" title.

How Many Cars Are In The US?

In 2019, there were around 284.5 million motor vehicles registered here in the United States, including passenger cars (35%), trucks, motorcycles (3.2%), buses, and other vehicles. Other relevant statistics:

  • Between 2001 and 2010 the number of registered vehicles in the US increased by 20%;
  • There were 17.2 million new light-vehicle registrations in 2018;
  • In 2016, 3 million cars were made in the US (from a total of 70.5 million worldwide);
  • In 2018, California was the leading state with 32.1 million vehicles registered (12% of all vehicles registered in the United States).

How Many People Lease vs Own a Car?

In 2017, 31.1% of all new car transactions were leased, meaning that 68.9% were being sold outright.

Is It Better To Lease Or Buy a Car?

Is it better to buy or lease?

Purchasing a car is almost always better than leasing it unless you:

  • Don't plan to drive it for a long time;
  • Didn't save enough for a down payment;
  • Drive more than 15,000 miles per year;
  • Want to drive a new car every 3 years and you can't afford it.

Benefits of leasing include:

  • No need for loan approval;
  • Not having to go through the hassle of selling the car yourself;
  • Typically a manufacturer warranty will help you save on the repair expenses and avoid huge repair costs;
  • Avoiding the "upside-down" status when you owe more than your car is worth – for leasing, the monthly payments are linked to the expected depreciation estimated for your lease term only.

Advantages of buying a car:

  • It's the cheapest way to own a car over a longer period of time;
  • The insurance premiums are normally lower than for leased cars;
  • The car is yours and you can sell it or trade it at any time;
  • You can change its appearance and accessorize it (leased cars must be kept in perfect condition);
  • There's no mileage cap (leased cars have a mileage limit and exceeding it carries substantial penalties).

Is a Car An Asset?

A car is usually an asset as it has a value that can be recuperated by selling it, but only if you paid cash for it OR – in case of financed vehicles - if the Actual Cash Value (ACV) is higher than what you still owe on the vehicle. If the ACV is lower than what's left to pay back, the car is a liability. More information could be found on the asset record report by performing an asset search.

Is a Car a Liquid Asset?

A vehicle is not a liquid asset because it cannot simply be sold on short notice or converted into cash without a major loss of investment.

Is a Car a Marital Asset?

A marital or matrimonial asset refers to financial assets (house, savings, pension) purchased during the course of the marriage. A car becomes a marital asset if it's acquired by any of the spouses while being married. Vehicles that were bought before or after marriage are considered non-marital assets.

How Are Vehicles Divided In a Divorce?

How are vehicles divided in a divorce?

In a divorce, cars that were purchased during the marriage are labeled "matrimonial property" and will be distributed through the property division process.

Should I Buy a Car Before a Divorce?

It's best not to buy a car before a divorce. In some states (California, Nevada, Washington, Louisiana, New Mexico, Texas, Arizona, Idaho, and Wisconsin), all assets acquired during a marriage fall under the "community property" statute, meaning they belong to the couple, even if they were purchased in a spouse's individual name. All the goods bought by either spouse while being married will be considered in the division of property. Only if you can prove you've used premarital funds, then your car could be seen as an independent property and you wouldn't have to split its value with your soon-to-be ex-partner. In the states that do not follow the community property rule, if one spouse paid for the care alone, that person owns it alone. When both partners are on the title, each of them is a 50% owner.
 

Is Giving Money Away Before Divorce Possible?

If you wish to make cash gifts to friends or family before divorcing you can do so, although it could be a red flag of funneling off funds. It's better to have your spouse's approval beforehand. As soon as the divorce case starts, the court will issue an injunction that won't allow the disposal of any assets.

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