The Closing Of The ‘Vermont Loophole’ Makes Saving A Cheap Car Ridiculously Difficult

For several years, the state of Vermont had been the savior of the cheap car enthusiast. If you bought some sort of plucky old junker without a title, Vermont was more than happy to give you a valid transferable registration with only a few questions asked. Those days are now over, and enthusiasts are left scrambling to figure out alternatives. I’m now going through the process to get a title for a vehicle, and it’s a total nightmare. Now, I don’t even want to save barn finds anymore.

Normally, buying a car or motorcycle without a title is a huge headache. Some states have even made it illegal to sell a vehicle without proper proof of ownership. These laws are well-meaning and are there to protect people from scammers. However, these laws and the barriers to obtaining a title for a vehicle that doesn’t have one mean that a lot of vehicles that can be saved are instead sent to scrap or are left to rot.

There are lots of innocent times in which you may purchase a vehicle that may not have a title. A barn find is a great example of this. Some vehicles sit in stasis for decades, managing to stay in existence long after their owners have passed. These cars don’t deserve to go to the crusher, but some states make it difficult to get a car like that legal again. Alternatively, you might run into a no-title situation when you scoop a beater off of someone’s driveway or buy an old enduro motorcycle. Some folks never register their off-road motorcycle because they never use it on the road. That may become a headache when you buy it and decide to put a plate on it.

Vermont Was Great

Thankfully, there had long been a solution to this. If you bought a vehicle that technically lived in legal purgatory, you really had to look no further than the Green Mountain State. I couldn’t figure out how long Vermont operated a mail-order DMV, but it was for at least over a decade.

Honestly, the Vermont DMV was a dream. The state was happy to send license plates to any resident of any state in the country, and the owner never even had to set foot in Vermont even once. Vermont was effectively America’s DMV, and it was an open secret. If you went to the Vermont DMV website, it even said that you do not have to live in Vermont to register your car in Vermont. The state was happy to get nearly free tax money from people who didn’t live in the state.

The process was shockingly easy. Vermont did not title vehicles that were 15 years old or older. So, if the hooptie you were saving was old enough, all of the proof of ownership you needed was a bill of sale and a VIN verification showing the vehicle wasn’t stolen. If you were dealing with motorcycles, the state didn’t even title anything under 300cc. So, you could have bought a brand new scooter and registered it in Vermont without issue. Vermont also didn’t title trailers under 1,500 pounds or low-power electric motorcycles.

For some, Vermont was also a savior because it allowed you to register trucks and buses as RVs without any proof that you had even converted them. This was great for folks who wanted to make their bus builds legal to drive home before converting them into RVs. Vermont was even a good place for people to register cars that had good titles. Car registration was just $76, and the tax rate was just six percent of the purchase price or book value. In my case, a Vermont registration was usually half the price of registering a car here in Illinois. Vermont registrations were even useful to owners of imported cars because they no longer had to worry about emissions testing.

Unfortunately, the Vermont “loophole” was used by more than just enthusiasts. On June 26, 2023, Vermont announced that it had closed its DMV system to only residents of the state. Its explanation? People had been using the Vermont DMV to commit felonies. Some folks stole cars and registered them in Vermont before their VINs got flagged for being stolen. Some other people used the Vermont DMV to create their own quasi for-profit DMV. There were even some major scams, too. It was a huge problem for the state and for the victims of stolen cars and of those scams.

So, the Vermont “loophole” is dead, and now, two years later, things haven’t changed.

Popular Alternatives Are Cost-Prohibitive

I have been trying to find a new Vermont, and honestly, I’ve come up empty-handed. There are other states that do not require residency for car registration, including Montana and South Dakota. However, those states require you to have a title for the car or to go through their bonded title process. The infamous Montana loophole also requires you to set up an LLC, and the businesses that provide this service charge so much money that it’s not worth it for a $1,000 crapbox, even if you did have the title to it.

There’s also Dirt Legal, a service that’s famous for producing titles and registrations for all sorts of vehicles that don’t have ownership papers. The company proudly proclaims: “Register or Title any Vehicle from any State. Guaranteed.”

But the sad twist is that Dirt Legal is ridiculously expensive. When I queried Dirt Legal about a vehicle without a title in 2024, the service was a whopping $2,000 and wasn’t really any meaningfully different than getting a bonded title in the state of Illinois. Now, Dirt Legal’s title recovery service is $1,299, but it still requires legwork on your end. Either way, it doesn’t make sense to pay $1,299 to register that cheap car you found in a field.

So, what’s the other option?

The Bonded Title

As it happens, I’m dealing with a title issue right now. Over five years ago, I bought a 2012 Volkswagen Jetta SportWagen TDI. The seller of this vehicle made the classic mistake of signing their name on the buyer’s line, something I didn’t notice until long after the transaction. Illinois Secretary of State (our DMV) offices are not fond of mistakes like that and told me to either get an affidavit from the seller or have them get a duplicate title. The problem was, by that point, I was no longer able to get in contact with the seller.

Thankfully, Vermont saved the day. The state didn’t transfer the title due to the error, but the title’s existence apparently was enough to give me license plates. Boom, good enough for me.

Since then, the messed-up title somehow got even more jacked up. I let a friend stay in my apartment while I was away for a couple of months, and they trashed the place. They even inexplicably included my title and some other important documents in their destruction. By my best guess, it’s almost like the title fell into a greasy pan. Either way, this was bad news because the title had a moisture-activated fraud mark that was now displaying. Now I was double-boned. Not even a Currency Exchange, a neat third-party place to cash checks or do title work, would touch the title.

This didn’t matter so long as I never sold the car. Well, I’ve been trying to sell this car for about two years now, and surprise, nobody wants to touch this mess with a 10-foot pole. The car has been such a problem child that it often just sat in outdoor storage:

How am I fixing this? Illinois offers a solution for problems like this, and it’s to get a bonded title. Now that the Vermont loophole is dead, this is now the best path that I’m aware of for a resident of Illinois to get a title for a vehicle that either doesn’t have ownership documents or when said ownership documents are sketchy. From Illinois:

A bond is required when standard ownership documents (i.e., assigned title) cannot be surrendered with an Application for Certificate of Title (625 ILCS 5/3-109). The Secretary of State may, as a condition of issuing a Certificate of Title, require the applicant to file a bond in the amount equal to one and one-half times the current wholesale value of the vehicle. The filing of this bond will protect the Secretary of State’s office and any prior owner or lienholder as well as any subsequent purchasers, or person acquiring security interest or respective successors, against any expense, loss or damage due to the issuance of a Certificate of Title. The bond (and the deposit filed with a cash bond) must be returned at the expiration of three (3) calendar years from the date of filing, unless the Secretary of State has been notified pending any action to recover on the bond.

So Much Paperwork

Right, so this isn’t like Vermont. You aren’t just showing a bill of sale and paying a fee. Instead, you have to post a bond, and for the next three years, anyone can challenge your right to own the car. Illinois says there are two types of bonds:

Cash Bond — A bond executed by the applicant for vehicle ownership and accompanied by the deposit of cash in the form of currency, cashier’s check, money order or bank certificate of deposit made payable to State Treasurer.

Surety Bond — A bond executed by the applicant for vehicle ownership and a person/firm authorized to conduct a surety business in Illinois, which obligates the guarantor to pay a third party upon default by the applicant in the performance of any duty the applicant owes to any third party.

Cash bonds are actually pretty rare. Say your car has an appraised value of $3,000. A cash bond would then be worth $4,500. Chances are, if you’re going through the bonded title process, you’re titling a cheap car, and a $4,500 cash bond on top of whatever you paid isn’t really in the cards.

The more common type of bond is a surety bond. Typically, you’ll pay a comparatively small amount of money–sometimes as low as $100–to an insurance company for the surety bond. How it works is that the insurance company essentially promises to pay the bond if your ownership of the vehicle doesn’t turn out to be kosher. Then, the insurance company will come after you for the money. If you last the three years without someone successfully challenging your ownership, the bond is satisfied and the title is all yours without an asterisk. The insurance company also gets to pocket whatever you paid for the surety bond.

If you live in Illinois and need to go through this process, you first need to gather whatever documents you have:

Evidence of your right to acquire a title, such as a bill of sale, receipt or canceled check. If evidence of your ownership is not available, a notarized statement explaining how you came into possession of the vehicle is needed. NOTE: A bond cannot be used to obtain titles on abandoned vehicles, repossessions, mechanics liens or estates, or to remove a lienholder.

Next, you need to take the vehicle to a certified dealership to get it appraised and to have the appraiser fill out the Affirmation of Appraisal form. Dealers do tend to charge for appraisals, and I’ve seen quotes as low as $25 to as high as $400:

A written appraisal of the current wholesale value of the vehicle from a licensed new or used vehicle dealer (including motorcycle, mobile home and trailer dealers), a licensed rebuilder (for salvage or junk vehicles only), a licensed real estate agent (for mobile homes only) or an officer of an antique vehicle club or association (for antique vehicles only). The appraisal also may be obtained from a used vehicle price guide, supported by copies of the front cover and pertinent pages of the guide, or printed from an online source. NOTE: If you are a licensed Illinois dealer, you cannot perform your own appraisal. Appraisals must come from disinterested, qualified parties.

Once you know how much your car is worth, you get the surety bond. In my case, the Jetta’s value times 1.5 is $4,797. I went to SuretyBonds.com for the surety and was charged $100 for the service. Immediately after paying the dues, I got a properly filled out Illinois Security Bond form and a Power of Attorney form. All I had to do was print it out.

The Waiting Game

From here, there’s just a lot of paperwork. Illinois has you fill out a title application form and a tax form. Then you take all of your paperwork, including any proof of ownership that you have, the surety bond, the power of attorney from the insurance company, the appraisal form, the tax form, the title application, and a check for applicable fees, wrap them up, and mail them to the state. The state will then take potentially several weeks to process your claim, and only after that you might get a title and license plates.

In theory, you’ll be paying for the surety bond, the appraisal, and the normal title and registration fees. Even if you pay $400 for an appraisal it’ll still come out under $1,000.

I did just that. Now, I wait to see if I can finally get a title for this car. As of right now, turnaround times from the Illinois SOS can be mind-numbingly slow. It recently took the state six months to ship the title for my new-to-me 2009 Smart Fortwo Passion Cabriolet. So I have no idea when I’m going to hear anything about this VW.

If you have no proof of ownership at all, things get really messy. You’ll need to fill out the Statement of Ownership form and get it notarized. You’ll also need to get the appraisal. Finally, you’ll also need to get a Law Enforcement Certification, which proves that the vehicle is not stolen and hasn’t been altered in a way to make it illegal. That last one can be obtained by calling your local non-emergency police line and having an officer come out. Click here for the whole Illinois bonded title guide.

Really, none of this is impossible. However, it is a ton of steps to register some crapbox that you found online. Also, the state reserves the right to deny your application if it thinks the person who appraised your car or motorcycle got its value wrong. Then, you need to go through the nightmare again. Consider that it can take months to get your title, even when it goes correctly. Having to do the process more than once because of a paperwork goof can be catastrophic.

Sadly, each state has its own process for registering vehicles with title issues. Some states are easier, while some are harder. One day, I might do a 50-state guide on this. But for now, I think I proved my point. The death of the Vermont loophole has made saving no-title hoopties unattractive. I wonder how many perfectly restorable vehicles have been lost due to the hurdles of getting a title?

At least the good news is that getting a title for a vehicle that doesn’t have papers is actually possible without Vermont. You just have to be prepared to run around. If you know of a better way than this, please send me an email at mercedes@theautopian.com.