Coronavirus-related closures of state motor vehicle departments this spring put a wrench in vehicle title work and registration processing, producing a backlog of unverified documents key to finalizing car sales.
Without the ability to process vehicle registration and titling data under lockdown, state governments couldn't perfect vehicle liens — legally verify that the lender owns a vehicle and has the ability to repossess it if a consumer doesn't pay back their loan. For lenders that purchased vehicle installment contracts in those states, not knowing the reason behind a delay in processing a customer's documentation could expose them to fraud.
Delays in processing title work and registrations also add liability to dealerships, which remain legally responsible for a customer's vehicle if the registration isn't transferred to the new owner.
It's difficult to determine how many deals were disrupted, given the unexpected trajectory of COVID-19 and resulting state closures, titling experts say. Whether states required electronic methods to submit paperwork also played a role in how much could be processed under shelter-in-place orders. Many states have been working to sort through backlogs but still have titling delays, according to Cox Automotive.