If you plan on purchasing a used vehicle in California, you should familiarize yourself with the California Defective Title Bond. This bond is put in place to protect the state and public from financial losses should someone register a vehicle they do not have a legal right to own. In most cases, these are vehicles that have defective or missing titles. If you buy a used car that does not have a valid title for any reason, you will likely need a Defective Title Bond before you can register your vehicle. Let’s take a closer look at what a California Defective Title Bond is, who needs one, and how to get one.

What is the CA Defective Title Bond?

The California Defective Title Bond is a surety bond required by the California Department of Motor Vehicles (DMV) for anyone trying to register a vehicle without a title or with a defective title. But what causes a title to become defective? A defective title is often the result of a car that’s been salvaged, stolen, or damaged in a natural disaster. You cannot register a vehicle in California without a valid title, and driving an unregistered vehicle is illegal.

That is where the CA Defective Title Bond comes in. A defective title bond—also called a title bond, bonded title, lost vehicle title bond, certificate of title, or a motor vehicle ownership bond—allows the purchaser of a used vehicle to register for a new title without having the original title in hand.

Like most surety bonds, a Defective Title Bond involves three parties: the principal, the obligee, and the surety company. The principal is the party that must obtain the bond. In this case, it’s typically the individual that purchased a used vehicle; however, on occasion, the original owner will get a title bond before selling their vehicle. The principal can be either the buyer or seller because the state (as of 2022) does not specify who must get the title bond. The obligee is the entity that requires the bond, in this case, the California Department of Motor Vehicles (DMV). And the surety company is the company that backs the bond.

The purpose of this bond is to protect the public from financial loss resulting from stolen property, illegal activities, or fraudulent paperwork associated with the vehicle in question. If you buy a car that doesn’t have a title or the title has gone missing, you will need to get a California Lost Vehicle Title Bond before you can register it.

Who needs this bond?

When an individual wants to purchase a vehicle for which there is no clean title or evidence of ownership and at least one of the following conditions exists:

• The value of the vehicle is $5,000 or more
• The value of the vessel (other than an automobile) is $2,000 or more
• A release from the legal owner/lienholder cannot be obtained
• The vehicle is nontransferable (nontitle goldenrod registration)

The state also requires a Defective Title Bond if the DMV puts a “stop order” on the registration of a vehicle, because the DMV believes that it was stolen or is otherwise not properly registered. The state does not specify whether the owner that wishes to sell their vehicle, or the buyer of the vehicle should obtain the bond, although most buyers prefer that the owner bonds the title before completing the sale.

It is important to note that a Defective Title, or Motor Vehicle Ownership, Surety Bond does not protect a car buyer from fraud or financial loss—it is not the same as insurance. But we do discuss how it works below.

How does the California Title Bond work?

As mentioned above, the California Title Bond protects the public against financial losses resulting from fraudulent paperwork or illegal activities associated with the vehicle in question. Bonded titles in California are typically issued for 3-5 year terms, after which the bond will expire. You do not need to renew a title bond.

If the vehicle in question turns out to be stolen, or associated with fraud or some other illegal activity, the rightful owner may file a claim against the bond. The surety company will investigate the claim and, if the claim is valid and the principal fails to remedy the situation, will compensate the claimant (whoever filed the claim) up to the bond amount.

Unlike insurance, the principal is financially responsible for reimbursing the surety company for the entirety of the claim, which may include additional fees and expenses incurred by the surety.

How much does a California Defective Title Bond cost?

The cost of a Lost Vehicle Title Bond in California depends on the bond amount you need. Typically, the bond amount is equivalent to the fair market value of the vehicle in question—not the purchase price. You can establish fair market value by finding the average between two sources:

• a written appraisal from a car dealer or motor vehicle insurance representative licensed in California, and
• a Statement of Facts Form filled out using a widely recognized motor vehicle valuation process, such as Kelly Blue Book.

The surety company will calculate how much you pay based on the bond amount and, in some cases, your credit. Generally, if you need a bond amount of $25,000 or higher, the surety company will require a soft credit check to provide you with a quote. Some smaller bond amounts, for example, those under $10,000, may start as low as $100 and may not require a credit check.

The best way to know how much you’ll pay for your bond is to request a free quote from South Coast Surety.

How do I get a Defective Title Bond in California?

Once the California DMV has informed you that you need a Motor Vehicle Ownership Bond, you can start the application process for your bond. Applying for a California Title Bond is simple. Just fill out this application to get started, and someone will contact you within 1-3 days regarding your free quote.

Still have questions?

If you still have questions about the bonding process, we encourage you to contact our surety experts today at 949-361-1692 or email us at apps@southcoastsurety.com. We would love to hear from you and help you with any of your surety bonding needs!

Key Takeaways

• The California Defective Title Bond is a surety bond required by the California Department of Motor Vehicles (DMV) for anyone who wants to register a vehicle without a title or with a defective title.
• The state does not specify whether the original owner or the buyer of the vehicle should obtain the bond, but most buyers prefer that the owner bond the title before completing the sale.
• Should the vehicle in question prove to be stolen or associated with fraud or other illegal activity, the rightful owner of the vehicle may file a claim against the title bond.
• The cost of a Lost Vehicle Title Bond is based on several factors, which include the bond amount required by the California DMV (determined by the fair market value of your vehicle) and your credit (for bonds over $25,000).
• Smaller bond amounts, like those under $10,000, may cost as little as $100.