This is part of a series breaking down all the terms you need to know if you're buying a new or used car from a dealership. Check out the rest of the series at our Car Buyer's Glossary.

The vehicle title is a very important document that's sometimes known as a pink slip – a name that comes from the color titles used to be in California. It's essentially a certificate issued by your state that shows who officially owns the vehicle, some important information about the vehicle, and it also might display a "brand."

We'll get to the brand and any other possible issues in a second. For a used car buyer, you'll want to make sure that the person selling the car matches the information on the title, and that the info on the title matches the vehicle. When buying the car, you'll need the seller to release their interest in the vehicle by signing the relevant part of the title. That means they're no longer legally responsible if, for example, you get a ticket or into an accident before you can get a title issued in your own name.

Titles vary by state, so what's on your specific title might be different. Some include required odometer disclosure portions that the seller signs to certify that the vehicle's mileage is correct. If you're not familiar with the process in your state, head to your state's vehicle licensing website and see what documents are required to purchase a vehicle and what you should expect to see on the title.

Remember, a title is not the same as a registration document. A title just lists ownership, a registration document is what actually makes the car legal to drive on the road. If you transfer title to your name, you'll still need to work with your local vehicle licensing office to get a valid registration.

If there's a lien on the title, it means that a bank or other lender actually owns the car and hold the title, and the car's "owner" is paying off the loan. If you're buying a car with a lien, you'll want to make sure you talk to the lienholder to find out how to pay off the lien and get the title.

Now, let's talk about "brands" and other possible title issues. A branded, rebuilt, or salvage title indicates that an insurance company has at some point declared the vehicle a total loss – the damage exceeded the value of the vehicle. The insurance company then sold the vehicle to a rebuilder, who repaired it in some fashion and then was issued a branded title. It's beyond the scope of this article, but be exceptionally wary of branded-title vehicles. You have no idea whether the vehicle was repaired properly and is still safe and reliable. For most people, they're a very bad idea and more expensive to insure.

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What if the title comes from another state? Use caution in this situation. While you can generally buy and title a vehicle from another state, sometimes unscrupulous people buy vehicles that would normally get a branded title and move them to another state, getting a clean title and "hiding" the issues the car has. This is called title washing, and is particularly common in states flooded by hurricanes. These flooded cars get cleaned up a bit, carted off to a new state, and get a clean title issued under false pretenses.

You can protect yourself from this to some extent by using a vehicle title history search tool. They generally charge a fee, even the government databases that only show a limited amount of data. The National Motor Vehicle Title Information System is a good place to start, displaying information about odometer readings, any title brands, and the title history. The National Insurance Crime Bureau's VINCheck service is a good way to see if the vehicle has been reported stolen. More comprehensive reports are available from other vendors – the most well-known service is CarFax. It's expensive and it's not foolproof. These services can only show you data that they've actually received. It's possible that an accident wasn't reported, or unethical people didn't report that the car had been flooded or stolen.

Here's a rule of thumb: any of these vehicle history or title search services can be used to rule something out if they show something bad on the report. But don't assume a clean report means nothing has ever happened to it. Use common sense, and always have a trusted mechanic give your car a pre-purchase inspection before buying.

As with any documents related to buying or selling a car, if you have any specific questions about the rules or documents needed in your state, contact your local licensing office.

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