In the realm of used car transactions,
An open title means the person selling a used car signs their name on the title, but leaves the buyer’s information blank. This lets the car be sold again without the first seller being involved.
It’s like they “left the title open” for the next owner to fill in.
Bob is selling his car to Jane. Bob signs his name on the title to show he sold the car. But he doesn’t fill in Jane’s name as the buyer. The title is now “open” – Jane can sell the car to someone else without involving Bob. The next buyer could write their name in on the title without Bob knowing.
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Why are Open Titles Used in Used Car Sales?
Open titles are sometimes innocently used to speed up transactions when people sell a car privately.
The seller signs and hands over the title, allowing the buyer to fill in their details at their leisure. However, while this seems more convenient, it can also lead to potential legal complications.
Why Sellers Use Open Titles
Some sellers utilize open titles to avoid certain legal and financial obligations:
- Tax Avoidance – By leaving a title open, sellers can potentially sell a used vehicle without recording it with the DMV. This allows them to skip paying applicable sales taxes, registration fees, and titling charges.
- Avoiding Dealer Licensing – In most states, you must register as a licensed dealer if you sell over a set threshold of vehicles per year. Unlicensed “curbstoner” dealers illicitly use open titles so they can keep selling multiple cars annually without applying for a dealer license.
- Title Jumping – While illegal, some sellers engage in title jumping schemes where they quickly resell a car without ever registering it in their name. This form of open titling can be used to perpetrate fraud. See our separate article on title jumping for more details.
The Risks of Open Titles in Used Car Sales | What Is an Open Title on a Used Car
While open titles might appear to streamline the process of transferring ownership of a used car, it comes with danger.
For instance, the buyer could resell the car without officially transferring the title into their name, potentially leading to legal issues.
Purchasing or selling a used vehicle with an open title carries substantial financial, legal, and administrative risks:
- For Buyers
- Difficulty properly registering the car in your name
- Possibility of buying a salvaged or flood-damaged vehicle without knowing
- Inheriting unpaid tickets, fees, and penalties accrued on the vehicle
- Potentially being liable in lawsuits related to the vehicle
- For Sellers
- Remaining legally responsible for the sold vehicle
- Continuing to receive renewed registrations, parking tickets, etc. related to the vehicle
- Facing penalties for tax evasion if caught improperly selling with open titles
- Being sued in case of accidents involving the vehicle
Identifying an Open Title
Follow these tips to recognize an open title when buying a used car:
- Verify the name on the title matches the seller’s ID
- Get a vehicle history report to uncover title issues
- Have the DMV run a title check for any red flags
- Walk away if name discrepancies appear between seller and title
The Prevalence of Open Titles
- A 2020 National Insurance Crime Bureau study found over 2 million cases of automobile title washing over the previous 5 years. Title washing relies on open titles to try and hide a vehicle’s salvage history.
- Florida is considered to have one of the highest rates of title fraud in the country, with tens of thousands of cases occurring annually. Open titles facilitate many types of title transfer schemes.
The Legal Perspective on Open Titles in Used Car Sales
Most states and regions have laws that discourage or outright prohibit the use of open titles in used car sales due to the associated risks. It’s always recommended to complete all necessary paperwork during the transaction to ensure a legal and smooth transfer of ownership.