In order to legally operate a vehicle on public roadways, you must follow a complex registration process. This process typically includes the production of pertinent documents and the paying of fees that go toward road improvements and maintenance. You have likely heard about a vehicle title, registration, and insurance, but you might not understand the relationship between these three important elements of vehicle ownership.
The title is essentially a document that proves ownership of the vehicle. If you purchased your vehicle by paying the full asking price, then you will have a title that is deemed free and clear. This means that you own the vehicle outright.
If you financed your vehicle through a credit union or dealership, the lender will place a lien on the title. A lien ensures that the vehicle cannot be sold by the borrower without first paying the balance of the loan. A title is needed to register your vehicle with the state and obtain valid insurance.
Unlike a title, the registration has nothing to do with the actual ownership of a vehicle. Instead, registration is proof that you have paid the fees required by your state government to operate your vehicle legally. Fee amounts can vary based on the model year and make of your vehicle.
Without valid registration, you cannot obtain a license plate or renewal sticker. Many states authorize law enforcement officials to issue citations for drivers who fail to maintain current registration status on their vehicle. Although registration isn't proof of ownership, you must provide a title and/or bill of sale and proof of insurance in order to register a vehicle in your name.
Serious car accidents can be costly. Since the average driver doesn't have the financial resources needed to cover medical bills and repairs that might stem from their involvement in an auto accident, insurance is required.
An insurance policy will provide financial compensation for certain types of damages. Some insurance companies require that the policyholder have an ownership interest in all vehicles listed on their insurance policy. Others may allow a parent to include a child's vehicle on a family policy, even if the parent is not listed as an owner on the vehicle's title.
You can insure a vehicle that is not registered, but the vehicle will not be legal to drive until the registration process has been completed.
Understanding the relationship between title and registration and insurance will help you see how these three documents work together to identify and track vehicles today.