What exactly is a bonded title?

If you want to change the owner of a vehicle in the United States, you need a car title. Have you lost or damaged it? A bonded title may be your solution.

Using a bonded title carries its risks and drawbacks – it should be your last resort when the original title is missing. With that said, sometimes there's no alternative, so let's look into what a bonded title is and how it works.

If you’re planning to buy a car without a title, knowing the principles, benefits, and potential risks of bonded titles can save you lots of time and money.

Bonded title meaning: the definition

A bonded title (also called a Certificate of Title Surety Bond or Lost Title Bond) is a document that shows who owns the vehicle when there’s no original title. If the previous owner presents proper ownership documents, you may have a problem.

Bonded car titles aren’t “bonded” permanently. Depending on the state, assuming that no other parties are interested in proving the ownership of the vehicle, bonded titles are replaced with regular car titles after a few years.

Benefits of a bonded title: why consider it?

Here are a few common situations when you could benefit from bonded titles:

• Losing a car title. Since drivers don’t use car titles daily, titles often get lost among other papers. In that case, if you need a new title and you don’t have additional proof of ownership, you can get a bonded title.
• Damaging a car title. From gloveboxes to wallets, drivers keep their car titles in various places. Therefore, titles become faded, torn, and worn. A bonded title may be the only solution if a DMV doesn’t give you a new car title.
• Buying a used car without a title. Buying a car without a title isn’t recommended, but if you’re still determined to buy, a bonded title can eventually make you a legal owner of the vehicle.
• Not being able to obtain the title from the previous owner. If you own a vehicle titled to someone else but can’t contact that person anymore, a title bond can become proof of your ownership.

One of the main reasons people go for bonded titles is the opportunity to purchase a car at a lower price. For instance, a car’s value can be up to 40% lower if it has a branded title and even more if the title is missing. As a result, you can land sweet deals if you research cars thoroughly beforehand and make them road-legal with a title bond.

Bonded title vs. clear title: what sets them apart?

Bonded and clear titles are not the same, but they are connected. A clear title indicates that the vehicle has no liens or other claims. If that’s not the case, you technically can’t get a bonded title for the vehicle.

With that said, before obtaining a bonded title, you should still ensure no other potential owners can prove their ownership and take the vehicle from you. If there’s a lien or other claims on the title, there’s a high chance that someone will eventually claim the vehicle.

As a side note, clear titles aren’t the same as clean titles. A clean title indicates that a car hasn’t been “branded” (e.g., as a lemon). Branded car titles warn about serious issues that may be ongoing or repaired, and you should know about them in either case. carVertical reports help reveal essential information about a vehicle’s history, including car accidents, mileage records, and photos (as seen in our vehicle’s history sample report)

Bonded title requirements: what you need to know

Even though bonded titles allow you to use the vehicle legally, a DMV won’t issue a bonded title without proper proof that you are a rightful owner. So, before aiming for a bonded title, gather all the proof that the vehicle belongs to you, including:

• A bill of sale
• Receipts, checks
• Text messages or email letters
• A photo of the seller’s ID

Once you have all the proof, check that the vehicle is eligible to receive a bonded title—most states have a list of requirements for cars to receive a bonded title. Some of the most important ones are:

• You have to be in control of the vehicle
• There can’t be liens or other security interests on the vehicle
• The vehicle must comply with U.S. Department of Transportation safety requirements
• The vehicle must be complete (motor, body, and frame)

There are also legal requirements and documentation to check and fill out, but more on that in the step-by-step process section.

Cost of a bonded title: understanding the financial aspect

The main expense when getting a bonded title is a fee for the service. Usually, the fee is $100 if the vehicle’s worth is less than $5,000. If the vehicle’s value is larger than $5,000, the fee is calculated according to the vehicle's overall value. For example, some companies charge $15 for every $1,000 when the vehicle's value exceeds $5,000.

Again, fees vary by company and state, so make sure you understand the expected costs before deciding on a specific surety company.

States that don’t issue bonded titles

Some states don’t issue or even accept bonded titles. As of today, the states that don’t allow bonded titles are:

• Delaware
• Hawaii
• Kansas
• Indiana
• Louisiana
• Kentucky
• Oklahoma
• Ohio
• Massachusetts
• South Carolina
• Pennsylvania
• Oregon
• South Dakota
• West Virginia
• Virginia

Different states may have different standards and requirements, so refer to the official state websites for more information. Some states, such as Indiana or Ohio, allow court-ordered titles, while others may have exceptions that could work in your case.

Risks of buying a car with a bonded title: things to consider

A bonded car title may seem the most straightforward solution in many situations, but it should always be your last option due to several risks.

A bonded title doesn’t guarantee a vehicle’s ownership. Once you get a title bond, the vehicle’s legal owner receives a letter informing them that someone received a title bond on their vehicle. By providing proper proof of ownership, the legal owner can claim the vehicle’s title, forcing you to return or pay for it.

There are situations when cars are stolen from driveways, sold without a title, and the new “owner” attempts to get a bonded title. In that case, the legal owner is notified and can easily claim the vehicle’s ownership using its title.

This explains why a surety company must approve your request for a title bond. They are obligated to cover any fees, taxes, or returns when ownership claims appear, but you’ll still have to pay the company back.

How to get a bonded title: step-by-step process

Obtaining a bonded title can be quite a tedious process—in the section below, we skip the small steps and break down the general guidelines.

Step 1: Determine eligibility

Does the car meet requirements, such as being intact and having no liens? You should also contact your state’s DMV to clarify if you really need a bonded title— they have a better solution. The state DMV can also briefly instruct you on how to get a bonded title and provide essential tips.

Step 2: Find a surety company

There are many surety companies offering car title bonds. Avoid shady businesses, ask for recommendations from friends or colleagues, and check reviews online. Research several companies and learn about their perks. For instance, for a few additional bucks, some companies may do the rest of the paperwork for you.

Step 3: Contact a surety company to get an approval

Once you find a surety bond company you like, contact them. The company has to approve your car title bond. This is determined by an underwriting process that helps calculate the risk of your situation and decide whether you’re eligible for a car title bond. Once your title bond is approved, you should receive a certificate of surety.

Step 4: Go to the DMV to get a bonded title

Normally, once a surety company approves your car title bond, you can take the certificate of surety to your state’s DMV along with the application for a bonded title. Typically, this is all you need to get a bonded title—the DMV will inform you if something is missing.

A few things to point out

• The process varies by state, so you should check with your state’s DMV before considering getting a bonded title.
• The certificates, required documents, and the process may differ by state.
• You may need to determine the vehicle’s value during an underwriting process in a surety company.
• The whole process of getting a bonded title may take up to a month.
• You’ll get a normal car title 3-5 years after getting a bonded title.
• The cost of paperwork in the DMV is around $10-20 but varies depending on the state.

Bonded title insurance

A vehicle must have a title if you want to register or insure it, but a bonded title also works in these cases—a title bond allows you to register and insure the vehicle.

Most insurance companies don’t care whether the title is normal or bonded, but some may charge more for bonded titles. That said, it shouldn’t affect the price drastically—the vehicle’s condition, age, and mileage affect the insurance price much more. If you’re going to buy a car with a problematic title, always check its history to better evaluate its condition. All you need for this is a VIN number.