What Is Title Washing?

What Is Title Washing?

When a car is involved in an accident, its title may be branded with a term like "salvage," "lemon" or "rebuilt" to show significant issues in its history. These brands can significantly reduce the car's value, by up to 50%, and can deter buyers and lenders who want to see a clean title. That's why some unscrupulous car sellers turn to title washing.

Title washing is when someone tries to change a car's branded history to make the title appear clean. This is a form of fraud that conceals evidence of damage and other issues so the car can fetch a higher selling price. It could also cost you significant money if you unknowingly buy a car with a washed title. Your insurer could also deny you coverage, and the car will be worth far less when you try to sell it.

Learn more: Used Car Scams and How to Avoid Them

How Does Title Washing Work?

One of the more common methods scammers use to wash titles is by moving a car across state lines to take advantage of weaker branding and titling rules. For example, a seller could take a flood-damaged car to a state that doesn't brand flood vehicles. Or they could retitle it in a state that doesn't check previous title records or national databases, such as the National Motor Vehicle Title Information System (NMVTIS).

After a flood, scammers often move cars with flood damage out of that state. That's what happened after Hurricane Katrina. Flooded vehicles were hauled out of Louisiana in large numbers and taken to states that didn't brand flood damage on the title. The cars were cleaned up and put back on the market. Unsuspecting buyers had no idea the vehicles had sustained saltwater damage, which compromised their electrical systems.

Signs of Title Washing

If you're looking to buy a used car, watch out for these warning signs of title washing:

• Suspiciously low price: If a car is priced well below its book value, it's often a sign of title washing.
• Suspicious vehicle history: If a car has a clean title but its vehicle history report shows past damage or a branded title, it's a big red flag. Look for other signs in the report, such as missing repair information or suspicious drops in mileage.
• Salvage auction records: If the vehicle report indicates the car has been sold at a salvage auction, it's a strong sign it's suffered major damage or been declared a total loss by an insurance company. It may have been retitled in another state to wash the title clean of any salvage branding.
• Title from another state: Be cautious of any title that appears to be brand new and issued in a new state, since scammers often move cars to states with lax branding rules to clean the title.
• Visible damage: If you can clearly see fresh paint, new welds or other signs of repairs on a car with a clean title, the car's history may have been washed clean.

How to Avoid Title Washing Scams

The best way to avoid becoming a victim of a title washing scam is not to rely entirely on the car title for critical information about the vehicle. Here are some steps you can take to protect yourself against title washing.

• Check the car title. Carefully look over the title for anything that looks altered, like vehicle identification numbers (VINs) or owners' names. Check for faded or low-quality print or a missing watermark. Make sure the VIN on the title matches the VIN on the car and that the name matches the seller's identification. Be cautious of a new title on an older car or if the title shows a recent change or several owners in different states, as this could be a warning sign of title washing.
• Ask to meet at the DMV. Meeting at the DMV office gives you the opportunity to show documents to a professional and verify that the details match the seller's ID. If the seller refuses to meet at your local DMV, it may be best to walk away.
• Have the car inspected by a trusted mechanic. Whenever you're considering buying a used car, it's always good practice to have an experienced mechanic inspect the vehicle for hidden damage or mechanical issues that could cost you later.
• Obtain a vehicle history report through AutoCheck. As we've seen, a car's title alone doesn't tell the whole story. You can find out title, brand, mileage, salvage and other crucial information by getting a copy of your NMVTIS vehicle report through your state's DMV or approved providers. AutoCheck by Experian gives you immediate access to NMVTIS data and other important vehicle information to help you spot damage or title issues before you buy.
• Check the VIN. Before purchasing a vehicle, run the VIN through VINCheck, a free search tool the National Insurance Crime Bureau (NICB) offers that can show if an insurance company has ever reported the car as a salvage or total loss. While not every insurance company reports information to the NICB, many do, and it could save you from unknowingly purchasing a car with hidden damage or a washed title.

Learn more: Questions to Ask When Buying a Used Car

What to Do if You're the Victim of a Title Washing Scam

If you fall victim to a title washing scam, gather the bill of sale, vehicle history report and other sale-related documents and report the fraud to your DMV or state licensing agency. They may investigate the fraud and can give you guidance on your next steps. You can report the incident to local law enforcement as well, since title washing is illegal, and they may be able to investigate.

It's also a good idea to file a complaint with your state's consumer protection agency, especially if you purchased the vehicle at a dealership. These state agencies oversee auto dealer fraud and can hold dealers accountable for deceptive practices like title washing.

Finally, let your insurance company know what happened. The proper condition of the vehicle and title should be reported, and it may reduce the chances that undisclosed damage will impact your coverage or cost you more later. You could also consult an attorney to discover your rights and your eligibility to sue for damages.

The Bottom Line

If you're in the market for a used car, be cautious of vehicles being sold with a washed title. If you find a car priced substantially lower than market value but not advertised as a salvage vehicle, it could be a sign the title is washed.

Remember not to trust a clean-looking title at face value. Follow the steps above to protect against title washing. Before you buy, get a vehicle history report, such as an AutoCheck report from Experian. This helps you confirm the car's history matches what's on the title, so you aren't surprised later by major issues the seller failed to disclose.