What is an Electronic Title Transfer?

In a world of instantaneous transactions, why should transferring your car title stay in the stone age? Electronic title transfers are changing the game in some states. We predict they’ll be the norm before long.

While traditional paper titles aren’t going away in the foreseeable future, electronic titles do have a certain convenience.

Let's look at the pros and cons of electronic title transfers.

The Electronic Lien and Title (ELT) system is a method of digitally managing vehicle titles and lien information. The ELT program is individually managed at the state level by participating states and their respective DMV (or equivalent vehicle registry agency).

An ELT has two primary components:

1. Title: this is the legal document that establishes a person or entity as the legal owner of a vehicle. When a vehicle is bought or sold, the title must be transferred to the new owner.
2. Lien: when you finance a vehicle, the lender, also known as the lienholder, has a legal claim or "lien" on the vehicle until the loan is fully paid off. The lienholder is typically a bank, credit union, or finance company. In a traditional, paper-based system, the title is held by the lienholder until the loan is paid off. This can lead to delays and potential errors when the lien is released and the title is transferred to the owner.

With an ELT, the title information and the lien information are all managed electronically. When a vehicle is financed, the lien is noted electronically on the title. Once the loan is paid off, the lienholder can electronically release their lien. The title can then be electronically transferred to the owner, or if the vehicle is sold, to the new owner.

There is a spectrum of ELT adoption across the 50 states. States fall into one of 3 categories.

1. ELT only
2. Accept both ELT and paper titles
3. No ELT (yet)

The following states have fully implemented an electronic lien and title program, to the point that ELT is required:

The following states allow drivers to choose between paper title and ELT.

The following states lag behind in ELT adoption; they currently don’t participate in any ELT program:

The following states are slated to adopt an ELT in 2023-2024:

An electronic lien and title transfer takes place digitally; here’s how the process goes:

1. Payoff of the loan: when a car owner pays off their vehicle loan, the lienholder (the finance company or bank) is notified.
2. Lien release: upon receiving the notification, the lienholder electronically submits a lien release to the appropriate state's Department of Motor Vehicles (DMV) or equivalent vehicle registry agency. This action removes their claim on the vehicle.
3. Update of title: the DMV updates the title information to reflect the release of the lien. The title status now indicates that the vehicle is free of liens.
4. Ownership transfer: if the owner decides to sell the vehicle, they can initiate the transfer of the electronic title through the DMV's system. The DMV will update the title information to reflect the new owner's details.
5. New lien (if applicable): if the new owner buys the vehicle with a loan, their lender will file a new lien, and the process starts again.

The biggest benefit of an electronic title is that it’s fast. You don’t need to wait for a paper title to arrive in the mail. E-titles can be verified quickly, expediting the entire process.

When it comes to buying a used car from a private party, there’s a spectrum of ELT adoption. In some states, you can digitally transfer the title, but this is not always the case. To be sure, check your state's DMV website.

PrivateAuto is the only transactional marketplace where you can easily and conveniently buy and sell used cars and get the deal done from start to finish.

Our technology-driven, self-service solution makes it simple and secure to communicate, e-sign state documents, and send or receive payments instantly and securely. You can also schedule a test drive and negotiate the price without ever disclosing your personal information.

Shop used cars for sale by owner today!