Should I buy a car with a bonded title? The answer is yes, but it is relative. Sometimes, buying a surety bond title car can be a bad idea and a financial trap if the history of the vehicle is salvage. If you do not understand what a bonded title is, but found a car listed with one, this post will help your understanding. You need to know what you are buying, especially if you really like the car.
What Does Bonded Title Mean on a Car?
A bonded title is similar to a regular vehicle title. You can still do registrations, get insurance, or sell your vehicle with it. The primary difference is the label “bonded” on it, which means it’s linked to a unique kind of insurance known as a surety bond.
Chances are, the regular title for this vehicle got lost or damaged during previous ownership changes. This made it impossible to prove who legally owned the vehicle. Since a surety bond is a legal way to prove ownership, the current owner bought one to legally sell the car and transfer the title.
Should I Buy a Car with a Bonded Title?
You should only buy a car with a bonded title if you know the history. A bonded title is not an automatic dealbreaker. Besides, they are issued when the original title is lost or destroyed. It can sometimes be a bit of a red flag, but not always.
If the seller has a bonded title, it means they have gone to the state with all the required paperwork to prove they own the vehicle. The state then issues a bonded title after the person purchases a bond, which is an insurance policy. If someone else comes forward later to say that they own the car, the bond can compensate the buyer.
In some cases, the original title might be lost, or the previous owner passed away and couldn’t sign over the title to the new owner. Or, there could have been a lien holder that went bankrupt. In these cases, a bonded title is issued.
I’ve had a bonded title before. I had a title that had been signed by the previous owners, but it was never properly transferred. I took all the paperwork I had to the state, purchased a bond, and then I was issued a bonded title. In Texas, where I live, the bond is active for 3 years.
Before you decide to buy a car with a bonded title, make sure to check the VIN to see if there are any outstanding liens on the vehicle. Other than that, buying a car with a bonded title isn’t much different from buying any other car with a clean title. It is far better than buying a salvage title car.
Bonded Title Risk: Is a bonded title bad?
Usually, not many people make claims on bonded titles. This is because the DMV investigates the vehicle’s history before giving out a bonded title. But sometimes, claims do happen.
If you buy a car with a bonded title, and a claim is made, you don’t have to worry about it. The bond does not get connected to your name as the title does. The person whose name is on the bond has to pay for any claims, not you.
If someone makes a claim, a judge decides that the vehicle goes back to them. Then, you will get your money back from the seller.
How Long is a Bonded Title Good for?
You don’t have to keep the ‘bonded’ label on your title forever. Usually, after 3-5 years (depending on your state) from when you were issued the bond, you can visit the DMV to get a regular title.
When to Get a Bonded Title
Only your local DMV can tell you if you can get a bonded title. If you have one of these reasons, call your local DMV and check if you can get a bonded title.
1. You Bought a Vehicle but Didn’t Get the Title
If you bought a vehicle and didn’t get the title, you might still be able to get one. To do that, you need to show that the vehicle is really yours. You can do this with a bill of sale or a canceled check. If you don’t have those, you could use a notarized statement explaining how you possessed the vehicle.
2. You Purchased a Vehicle and Only Got a Bill of Sale
If you bought or got a vehicle as a gift and only have a bill of sale, you could get a bonded title. Just make sure to keep your bill of sale – you’ll need it to show you own the vehicle.
3. You Bought a Vehicle and Got a Title with Errors
If you bought a vehicle, but the title has mistakes, like the wrong names or missing seller info, you could get a bonded title.
If the seller’s name isn’t on the title (called title-jumping), a bonded title could help. Also, if your title is damaged or hard to read (like with white-out), a bonded title might be a solution.
4. Misplaced Title After Vehicle Purchase
Maybe you bought a vehicle, received the title, but then lost it before putting it in your name. If this happened, you can use your bill of sale, receipt, or a notarized statement to apply for a bonded title
If you already transferred the title into your name before losing it, you can just request a duplicate title from your DMV. You won’t need a bonded title in this situation.