You’ve just financed your dream car and all that’s left to do is sign the paperwork, and you’re ready to hit the road. But as you’re going through legalities, you encounter terms like “title-holding” vs. “non-title-holding.” What do they mean?
Drivers who finance their first car may be surprised to find out that the title doesn’t always transfer to you. Depending on your state, you may receive the title, or the lender might hold on to it – that’s what title-holding and non-title-holding refer to.
In the following sections, we clarify the differences between title-holding vs. non-title-holding states, how they impact your financed car, and how to sell your car in the future.
Before we discuss the difference between title-holding and non-title-holding states, let's first define what a car title is. A car title is a legal document that proves ownership of a vehicle.
The information on a car title varies by state. But most contain the same general information:
Having a car title is mandatory, as it serves as proof of ownership and is required to legally use a vehicle. Depending on the state you finance your car in, you may receive the title outright or the lender might hold on to the title until you pay off the balance.
In a title-holding state, the lender holds onto the vehicle title until you fully repay your loan. In these states, the lender is listed as the lienholder, while your name will be listed as the primary owner.
While you are still paying off the loan, you’ll receive a registration certification but not the title itself. Once the loan is paid in full, the lender will send you the title and a lien release letter. You will be responsible for taking these documents to the DMV to remove the lender as a lienholder from the title.
In non-title-holding states, the vehicle owner gets possession of the car title even if they haven't paid off their loan in full. When you buy a car with a loan in one of these states, you are listed as the primary title holder. The lender's name is also listed separately on the title as the lienholder, meaning they have a legal claim to the vehicle.
Once you pay off the loan, the lender provides you with a lien release document. You can then take the letter and the title to the DMV to take the lender off the title.
The main difference between title-holding vs. non-title-holding states depends on who the primary title holder is during the loan period. In title-holding states, the lender holds the title until the loan is repaid; in non-title-holding states, you hold the title.
Don't know where your state falls? Check out the list of title-holding states and non-title-holding states below:
There are currently nine title-holding states:
There are currently 41 non-title-holding states:
If you’re looking to sell your car, you’ll need to make sure you abide by your state’s regulations. This ensures the title is legally transferred to the buyer. When selling your car, there are two main considerations: whether your state is title-holding vs. non-title-holding and if your lien is paid off. Here’s what to do based on your situation:
If you still owe money on your car in a title-holding state, here are the steps to take to correctly sell your car:
In non-title-holding states, the process is similar with a few minor differences:
If your lien is already paid off in a title-holding state:
The process in non-title-holding states is similar to title-holding states when the lien is paid off:
The main difference between title-holding and non-title-holding states is who holds the physical title document during the loan period. This distinction can significantly impact your responsibilities and the ease of managing your car ownership.
Being aware of your state's requirements helps you stay compliant with legal obligations, avoid potential issues, and ensure a smoother transaction when buying, selling, or refinancing your vehicle.
This section addresses some frequently asked questions to help clarify the process of handling car titles.
Contact your lender to confirm that the loan is fully paid off and request a lien release letter. Then, take the lien release letter and other supporting documents to the DMV to obtain the title.
If you notice any errors on your car title, contact your local DMV to correct them. You may need to provide supporting documents, such as the bill of sale or lien release letter, to verify the correct information.
Yes, you can sell your car even if you have lost the title. You will need to request a duplicate title from your local DMV before completing the sale.
Failing to transfer a car title promptly can lead to legal and financial complications, including fines, penalties, and difficulties in proving ownership or registering the vehicle.
Title transfer fees vary by state. Generally, they range from $15 to $50 for the title application, $25 to $200 for registration, and any applicable taxes, usually around 5% to 10% of the vehicle’s value. Check with your local DMV for specific fee details.