It’s important to be honest when you’re getting a loan, but title washing can make it hard to find out about a car’s history. You need to know as much as possible about the car to figure out how much it’s worth and make sure you don’t lend the borrower more than the car is worth. Determining the vehicle’s true value, though, requires you to find the vehicle’s real title and history.
In the US, there are different kinds of vehicle titles. The main difference is between “clean” titles and “branded” titles, like a “salvage” or “rebuilt” title. The type of title is an important indicator of the vehicles history and condition.
If you know about the different types of vehicle titles in different states, you can better understand how title washing works, spot it, and avoid overvaluing salvaged or rebuilt cars.
If you’re in the market for a used car, you may come across a great deal on a vehicle with a clean title. But upon closer inspection, you realize the car was previously declared a total loss by an insurance company. Should you buy it? Or is this a red flag you should avoid?
As a used car buyer, it’s critical to understand the risks of purchasing a vehicle with a total loss history that now mysteriously has a clean title. This unfortunately common scenario is often the result of an illegal practice called “title washing.”
In this comprehensive guide I’ll explain what title washing is the dangers of buying a title washed car, and tips to avoid these risky vehicles. My goal is to empower used car buyers to make informed decisions when you come across enticingly priced vehicles with suspicious title histories.
What is Title Washing?
Title washing refers to illegally altering a vehicle’s title to remove any brands that indicate past damage floods salvage status, or that it was deemed a total loss.
Shady sellers “wash” the original title to eliminate these brands. The goal is to make a car with serious issues appear clean on paper so they can sell it for more money.
Some common title washing techniques include
- Applying for a new title in another state that doesn’t require brands
- Using an alternative VIN on the title application
- Lying on the application about the vehicle’s history
- Exploiting loopholes in different states’ title rules
No matter the technique, title washing is illegal in all states. It unjustly profits the seller while deceiving and endangering buyers.
Dangers of Buying a Title Washed Car
While a title washed car with a suspiciously low price may seem tempting, here are some of the significant risks you take buying one:
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Overpaying: You’ll likely massively overpay if you assume the clean title means a clean history.
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Safety hazards: The car could have serious latent issues making it unsafe if repairs weren’t done properly.
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Costly repairs: You may need to sink thousands more into repairs you didn’t expect with a supposedly clean car.
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Insurability issues: Insurers often won’t cover rebuilt/salvage vehicles or only at very high premiums.
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Registration problems: States may refuse to register the car if the washed history is uncovered.
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Resale difficulties: Banks won’t finance purchases of these cars, and selling will be near impossible.
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Void warranty: Any included warranty is voided once the washed title is revealed.
Overall, title washing puts buyers in a terrible situation. That seemingly good deal becomes a legal and financial nightmare.
How to Avoid Title Washed Cars
Now that you know the risks, here are some tips to avoid buying title washed vehicles:
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Carefully inspect the title for any evidence of tampering. Verify the VIN on the title matches the VIN plates on the car.
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Run a used vehicle history report to uncover any title brands or total loss history.
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Research the title branding laws and processes in the state where the car is being sold.
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Contact insurance companies to see if they have any record of that VIN being a claimed total loss.
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Get a pre-purchase inspection by a trusted mechanic to catch any signs of prior damage.
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Walk away if the seller seems reluctant to provide information or if anything seems suspicious.
Not All Branded Title Vehicles Are Bad Deals
It’s important to note that not all vehicles with rebuilt/salvage titles are bad cars or scams. If properly repaired and legally titled, they can be fine affordable options.
Some tips for finding a good branded title vehicle:
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Focus your search on newer models – major repairs on older cars are more concerning.
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Only consider those rebuilt very recently so repairs haven’t degraded.
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Have an inspection done by a shop familiar with rebuilds to ensure repairs were done properly.
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Ask for receipts showing exactly what repairs were performed.
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Research how to legally title/register a rebuilt vehicle in your state and follow each step.
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Get guaranteed quotes from insurers confirming coverage for a rebuilt vehicle before purchase. Understand the costs.
As long as repairs were done properly and the title is legal, a rebuilt vehicle can still be a smart purchase for many buyers. Just take precautions to verify its full history first.
Check That Title Carefully Before Buying
The bottom line when purchasing any used vehicle is you must thoroughly research its history and title status before purchase. Illegal title washing is common, so protect yourself by taking steps to confirm the true status.
Carefully vetting titles helps ensure you don’t end up with an unsafe rebuilt vehicle disguised as a clean title car. While tempting deals exist, it’s essential to enter any used car purchase with eyes wide open.
FAQ About Total Loss Vehicles:
What does it mean when an insurance company declares a vehicle a total loss?
A total loss means the vehicle damage exceeds ~75% of the car’s pre-accident value, or the cost of repairs exceeds the car’s value. The insurer then deems it a total loss rather than repairing.
Can a total loss vehicle still have a clean title?
Once declared a total loss, the car should have a salvage or rebuilt title brand. A clean title on a previously totaled vehicle is a red flag for potential illegal title washing.
What does “insurance loss reported” mean on a vehicle history report?
This indicates the vehicle was totaled/deemed a total loss by an insurance company at some point in the past. This is concerning if the title no longer indicates that status.
Should I avoid cars with rebuilt/salvage titles?
Not necessarily – if properly repaired, inspected, and legally titled, they can be affordable options. But take steps to verify repairs were done right before purchasing.
What steps can I take to avoid illegally title washed vehicles?
Closely inspect the title, run a vehicle history report, have a mechanic’s inspection, research the title laws, and walk away if anything seems suspicious about the deal.
What is title washing?
Title washing is a form of fraud that continues to plague used car buyers and lenders alike. Car thieves and dishonest owners often move cars between states with different title laws. One state may be able to fix up a car, while another may give it a clean title. Since the federal government doesn’t set rules for used car title branding, dishonest sellers will take a damaged car to a state with lax title laws to get a clean title.
Forgery is another way that criminals wash titles. They make fake lien release documents or new titles to make it look like the car never had major damage or that someone else has a secured interest in it. Ultimately, the goal of both methods is to erase a vehicle’s history.
This “washing” process effectively allows a fraudster to eliminate a negative title brand such as “salvaged” and “rebuilt” from an unperfected title. Then, the unsafe and low-value vehicle is sold to an unsuspecting buyer for a price higher than its actual value. These severely wrecked vehicles present a real danger to both the consumers who unknowingly purchase them and lenders who supply the loans.
You might overestimate the value of cars whose titles have been washed, and if the buyers of those cars don’t pay back their loans, you could lose money. Sometimes, the police take back cars that were stolen, or the owners find out they bought lemons that cost too much to fix. Both of these situations force new car owners to pay back a loan for a car they can’t use or have anymore. You could even face civil lawsuits from buyers who blame you or the dealership for the inaccurate titles.
What states are title washing states?
One reason vehicle title washing is easy is because each state in the U. S. has its own definitions of how a severely damaged car title is branded.
However, the list of title washing states is ever-changing as more are becoming increasingly compliant with the National Motor Vehicle Title Information System (NMVTIS). States provide a vehicle’s Vehicle Identification Number (VIN) to create a database that provides complete and accurate vehicle histories to help combat vehicle fraud. As of April 2022, 49 states and the District of Columbia provides data and inquires into the system before issuing new titles. The state of Hawaii is currently in development to reach compliance with NVMTIS.