Our new year brought us a change in the law on how motor vehicle titles are held. If you never finance your vehicles and can pay for them with cash, then read no further. But, if you are like most of us who borrow money to buy a car, you should understand the changes.
When it comes to motor vehicle financing, states are divided into two camps: lienholder (or titleholding) and non-lienholder (or non-titleholding). In lienholder states, the title of the vehicle goes to the lender until the vehicle is paid off, at which time the lender sends the title to the car owner with a lien release. In non-lienholder states, the new owner gets the title, but the lienholder appears on the front of the title to alert any possible buyer.
Until last year, Arizona was a non-lienholder state. So when you financed the purchase of your car or truck, you received the title from Arizona's Department of Transportation Motor Vehicle Division (MVD). That title came with the name of your vehicle's lienholder on the front. Once your car or truck was paid off, you then received a lien release from your lender to keep with your title.
But as of January 1, 2003, Arizona became a lienholder state, and the MVD now sends the title to the bank, credit union or finance company that loaned you the money. This change in the law was made for "consumer protection." Unfortunately, there are also "consumer hassles" that come with it. Here are a few tips:
- Know where your title is! Know which department of your bank, credit union or finance company actually keeps the title. Keep the telephone number and address of that department in your car file so that you can find it without having to make countless phone calls. For example, if you are in an accident and your car is totaled, you will need to know where your title is so that your or the other driver's insurance company can pay off the loan and pay you the difference, if any. If you don't know where your title is, it can take days to find it. If you lose your title and must order a duplicate, the MVD will send it your lienholder and not to you.
- Make sure your annual vehicle registration is in your vehicle. That goes without saying, but your vehicle registration is proof that you own the vehicle. Keep it in your vehicle at all times. If you have just bought the vehicle, the validated title and registration application will be your proof of ownership.
- Contact your lienholder if you decide to sell your vehicle. Arizona law requires you to transfer the title to the new owner at the time of delivery. To do so, you must get the title from your lienholder. You cannot apply for and give a duplicate title to the buyer because any duplicate title will be sent to the lienholder. Instead, the MVD recommends you obtain a "Power of Attorney With Odometer Disclosure" form. This allows you to give power-of-attorney to the buyer to sign off your interest. As the seller, you are required to complete the odometer information. You should contact your lienholder and request that your title (with lien release) be sent to the new owner. If you are trading in your vehicle to a dealer, the dealer will have you sign a Dealer Acquisition Contract in lieu of presenting title at the time of the trade-in.
- You may have challenges in Mexico. For those of us who head south, Mexico requires proof of ownership for any vehicle driven from the United States within its borders. There is a wide "free zone" in certain areas along the border inside Mexico where your vehicle's current registration is considered proof of ownership. (Don't worry, Rocky Point is in the "free zone.") Beyond the "free zone," however, an actual title is required. How will you prove ownership without your title beyond the "free zone"? Good question. Find out what you can before you go.
The new law does not require us who already have lien-encumbered vehicle titles to have them turned in and re-issued. But if you lose your title and request a duplicate, it will be sent to the lienholder.
If you have any questions, we will gladly meet with you in person or speak with you by telephone, at no charge to you. We are happy to accommodate your schedules and will come to you, if you prefer.
If you have any questions about a car accident or any other personal injury matter, call Kevin Chapman at Rowley Chapman Barney & Buntrock, Ltd. (480) 833-1113.
