When we acquire a vehicle through finance, we come across terms that can be confusing and unfamiliar. One of them is the "retention of title". In this article, we are going to explain what this concept means and how it can affect the car buyer.
What is retention of title on a car?
Retention of title is a contractual clause that is established when we acquire a vehicle through finance, whether through the dealer or a bank such as BBVA.
This clause allows the financial institution to retain ownership of the vehicle until the buyer has paid the agreed amount in full.
In other words, retention of title means that the entity financing the purchase of the vehicle (usually a bank or finance company) retains ownership of the car until the loan taken out to buy it is fully repaid.
In this way, if the buyer does not finish paying for the vehicle according to the instalments set, the finance company can repossess it more easily because it still appears as the owner.
Removing the retention of title is crucial in order to transfer ownership of the vehicle to the buyer once the loan has been paid.
Does retention of title affect ownership of the vehicle?
Although the buyer possesses and uses the car, they are technically not its owner while a retention of title exists. This means that, even though they can use it and enjoy it, they will not be able to sell it or transfer its ownership until that retention is cancelled.
Retention of title is registered with the Vehicle Register of the Directorate-General for Traffic (DGT). In this way, there is a record that ownership of the vehicle belongs to the financial institution and not to the buyer, until full payment is made.
This has important implications. For example, the buyer will not be able to:
Sell or give the car to another person.
Take the vehicle off the road.
Change important parts of the vehicle such as the engine or bodywork.
Use the car as security to apply for another loan or credit.
Only when the debt incurred has been fully extinguished can the retention of title be cancelled from the DGT register and the buyer become the outright owner of the vehicle.
How can I tell whether a car has retention of title?
There are two main ways to find out whether a car has retention of title:
Requesting a detailed vehicle report: This can be done online by entering the car's registration number and paying the corresponding cost (around 10 euros). The report will show information about the legal status of the vehicle, including whether it has any charge or encumbrance registered, such as retention of title. At agencies such as Gestalde can be requested very easily.
Requesting an official extract from the Register of Movable Assets: This request must be made in the province where the car is registered. The official extract contains registry information about the vehicle, such as owners, charges and encumbrances. The price is usually around 5 euros.
Both options will provide you with information on whether there is or is not a retention of title over the vehicle. They will also let you know which financial institution has the retention registered in its favour.
In addition to these two options, many financial institutions issue a release of charges letter when the loan for the car is considered finished. In that letter they confirm that the vehicle no longer has retention of title.
To remove it, do you have to pay off the full loan linked to the car?
If you have a car with retention of title and want to sell or give it away, you must first cancel this clause. This means paying the full outstanding amount to the creditor (the financial institution). Once this payment has been made and the institution issues the letter confirming the cancellation of the retention, you can request that the retention be removed from the Register and thus proceed legally with the sale or transfer of the vehicle.
You need to be very careful here because selling or transferring a car with retention of title to a third party without having cancelled that retention beforehand may legally be considered misappropriation.
What are the steps to cancel a car's retention of title?
Cancelling retention of title involves following a series of steps, which may vary slightly depending on each case. According to Transferencia24, these are the general steps:
Pay the creditor (financial institution) the full outstanding loan.
Request from the financial institution a document that certifies that the loan has been paid in full. This document is usually known as a "release of charges letter".
Request an official extract from the Register of Movable Assets where the car is registered. This extract contains the vehicle's registry information.
Submit the finance company's release of charges letter to the Register of Movable Assets.
The Register will issue a new official extract without the retention of title, confirming its cancellation.
Pay the Registry fee for processing, which is usually around 10 euros.
Once these steps have been completed, the retention of title will have been effectively cancelled and the buyer of the vehicle will become the full owner of it.
What is the cost of removing retention of title?
The process for removing retention of title has an associated cost, which can vary slightly but usually comes to around 20-30 euros between fees and administrative costs:
Cost of the vehicle official extract: approx. 5 euros
Cost of the processing at the Register to cancel the retention: approx. 10 euros
Costs of sending documents, certificates, etc. charged by financial institutions.
Therefore, although there are steps to follow and some fees to pay, in general the cost of freeing a car from retention of title is not very high.
Some companies handle these procedures from start to finish for a fixed amount, around 100 euros.
How long does it take to receive the documents without retention of title?
Once all the necessary procedures to remove the retention of title at the Register of Movable Assets have been completed, you should wait approximately 15 working days to collect all the documents free of charges from the relevant register.
This is the estimated time for the Register to process the cancellation of the retention and issue a new official extract for the vehicle without that charge.
However, the process can be sped up if handled through specialist companies. In some cases it can be obtained in as little as 48 hours.
What are the consequences of selling a car with an active retention of title?
Selling a car with an active retention of title can lead to serious legal problems for both the seller and the buyer:
The seller may be accused of misappropriation for disposing of something that legally does not belong to them.
The buyer does not acquire legal ownership of the vehicle, so they would not be able to sell or modify it. If they finish paying for the car, the original finance company could claim it back.
The financial institution with the retention in its favour could seize or repossess the vehicle at any time, leaving the buyer without the car they had paid for.
Therefore, it is strongly discouraged.
Common cases of retention of title in car buying and selling
Retention of title is a common procedure in the buying and selling of financed cars. It is very common for buyers not to know that they must cancel or remove the retention in order to change the vehicle's ownership once the payment period with the finance company has ended.
Some typical cases are:
Sellers who consider the finance to be finished but do not remove the retention before selling the car.
Buyers who purchase a second-hand car without checking whether it has any outstanding charge or encumbrance.
People who inherit a vehicle and cannot sell it or change the ownership because a retention of title exists.
Relatives of the deceased owner who use the car but do not know the steps to follow regarding the retention.
To avoid unpleasant surprises, both sellers and buyers should make sure of the vehicle's legal status and cancel any outstanding retention before signing any transaction.
Frequently asked questions about retention of title on a car
Below are some of the most frequently asked questions regarding the cancellation of retention of title:
Q. How does it affect the sale of the car if the future registered owner is not the same person as the one financing it?
A. In this case, the future owner of the vehicle, even if they have no income, must appear in the finance agreement as a JOINT HOLDER.
Q. Do finance companies and banks always apply this clause?
A. They always reserve the right to apply it, but they do not always do so. It generally depends on the risk they assess for the transaction. As a rule, the official finance companies of the brands always apply it.
Q. How long does it take to cancel a retention of title and how much does it cost?
A. The process can take between 2-4 weeks. The total cost is usually between 20-30 euros in fees and procedures. Some companies offer to handle it faster, in 48 hours, for around 100 euros.
Q. How do I know whether my second-hand car has any retention or outstanding charge?
A. It can be checked easily by requesting an official extract for the vehicle or a title report. This confirms any possible charges existing on the car.
Q. If I finished paying for my car a long time ago, can I sell it directly?
A. No. Even if it has been paid for in full, it is necessary to explicitly cancel the retention of title before any sale or transfer of the vehicle.
Q. Can I cancel the retention of title of a deceased family member?
A. Yes. The legal heirs must prove their link to the deceased owner and can manage the cancellation of the retention without any problems.
In conclusion, before buying or selling a financed car it is essential to make sure its legal status is correct, with no outstanding charges, to avoid later problems. Being well informed and using specialist companies can help in these cases.
When we acquire a vehicle through finance, we come across terms that can be confusing and unfamiliar. One of them is the "retention of title". In this article, we are going to explain what this concept means and how it can affect the car buyer.
What is retention of title on a car?
Retention of title is a contractual clause that is established when we acquire a vehicle through finance, whether through the dealer or a bank such as BBVA.
This clause allows the financial institution to retain ownership of the vehicle until the buyer has paid the agreed amount in full.
In other words, retention of title means that the entity financing the purchase of the vehicle (usually a bank or finance company) retains ownership of the car until the loan taken out to buy it is fully repaid.
In this way, if the buyer does not finish paying for the vehicle according to the instalments set, the finance company can repossess it more easily because it still appears as the owner.
Removing the retention of title is crucial in order to transfer ownership of the vehicle to the buyer once the loan has been paid.
Does retention of title affect ownership of the vehicle?
Although the buyer possesses and uses the car, they are technically not its owner while a retention of title exists. This means that, even though they can use it and enjoy it, they will not be able to sell it or transfer its ownership until that retention is cancelled.
Retention of title is registered with the Vehicle Register of the Directorate-General for Traffic (DGT). In this way, there is a record that ownership of the vehicle belongs to the financial institution and not to the buyer, until full payment is made.
This has important implications. For example, the buyer will not be able to:
Sell or give the car to another person.
Take the vehicle off the road.
Change important parts of the vehicle such as the engine or bodywork.
Use the car as security to apply for another loan or credit.
Only when the debt incurred has been fully extinguished can the retention of title be cancelled from the DGT register and the buyer become the outright owner of the vehicle.
How can I tell whether a car has retention of title?
There are two main ways to find out whether a car has retention of title:
Requesting a detailed vehicle report: This can be done online by entering the car's registration number and paying the corresponding cost (around 10 euros). The report will show information about the legal status of the vehicle, including whether it has any charge or encumbrance registered, such as retention of title. At agencies such as Gestalde can be requested very easily.
Requesting an official extract from the Register of Movable Assets: This request must be made in the province where the car is registered. The official extract contains registry information about the vehicle, such as owners, charges and encumbrances. The price is usually around 5 euros.
Both options will provide you with information on whether there is or is not a retention of title over the vehicle. They will also let you know which financial institution has the retention registered in its favour.
In addition to these two options, many financial institutions issue a release of charges letter when the loan for the car is considered finished. In that letter they confirm that the vehicle no longer has retention of title.
To remove it, do you have to pay off the full loan linked to the car?
If you have a car with retention of title and want to sell or give it away, you must first cancel this clause. This means paying the full outstanding amount to the creditor (the financial institution). Once this payment has been made and the institution issues the letter confirming the cancellation of the retention, you can request that the retention be removed from the Register and thus proceed legally with the sale or transfer of the vehicle.
You need to be very careful here because selling or transferring a car with retention of title to a third party without having cancelled that retention beforehand may legally be considered misappropriation.
What are the steps to cancel a car's retention of title?
Cancelling retention of title involves following a series of steps, which may vary slightly depending on each case. According to Transferencia24, these are the general steps:
Pay the creditor (financial institution) the full outstanding loan.
Request from the financial institution a document that certifies that the loan has been paid in full. This document is usually known as a "release of charges letter".
Request an official extract from the Register of Movable Assets where the car is registered. This extract contains the vehicle's registry information.
Submit the finance company's release of charges letter to the Register of Movable Assets.
The Register will issue a new official extract without the retention of title, confirming its cancellation.
Pay the Registry fee for processing, which is usually around 10 euros.
Once these steps have been completed, the retention of title will have been effectively cancelled and the buyer of the vehicle will become the full owner of it.
What is the cost of removing retention of title?
The process for removing retention of title has an associated cost, which can vary slightly but usually comes to around 20-30 euros between fees and administrative costs:
Cost of the vehicle official extract: approx. 5 euros
Cost of the processing at the Register to cancel the retention: approx. 10 euros
Costs of sending documents, certificates, etc. charged by financial institutions.
Therefore, although there are steps to follow and some fees to pay, in general the cost of freeing a car from retention of title is not very high.
Some companies handle these procedures from start to finish for a fixed amount, around 100 euros.
How long does it take to receive the documents without retention of title?
Once all the necessary procedures to remove the retention of title at the Register of Movable Assets have been completed, you should wait approximately 15 working days to collect all the documents free of charges from the relevant register.
This is the estimated time for the Register to process the cancellation of the retention and issue a new official extract for the vehicle without that charge.
However, the process can be sped up if handled through specialist companies. In some cases it can be obtained in as little as 48 hours.
What are the consequences of selling a car with an active retention of title?
Selling a car with an active retention of title can lead to serious legal problems for both the seller and the buyer:
The seller may be accused of misappropriation for disposing of something that legally does not belong to them.
The buyer does not acquire legal ownership of the vehicle, so they would not be able to sell or modify it. If they finish paying for the car, the original finance company could claim it back.
The financial institution with the retention in its favour could seize or repossess the vehicle at any time, leaving the buyer without the car they had paid for.
Therefore, it is strongly discouraged.
Common cases of retention of title in car buying and selling
Retention of title is a common procedure in the buying and selling of financed cars. It is very common for buyers not to know that they must cancel or remove the retention in order to change the vehicle's ownership once the payment period with the finance company has ended.
Some typical cases are:
Sellers who consider the finance to be finished but do not remove the retention before selling the car.
Buyers who purchase a second-hand car without checking whether it has any outstanding charge or encumbrance.
People who inherit a vehicle and cannot sell it or change the ownership because a retention of title exists.
Relatives of the deceased owner who use the car but do not know the steps to follow regarding the retention.
To avoid unpleasant surprises, both sellers and buyers should make sure of the vehicle's legal status and cancel any outstanding retention before signing any transaction.
Frequently asked questions about retention of title on a car
Below are some of the most frequently asked questions regarding the cancellation of retention of title:
Q. How does it affect the sale of the car if the future registered owner is not the same person as the one financing it?
A. In this case, the future owner of the vehicle, even if they have no income, must appear in the finance agreement as a JOINT HOLDER.
Q. Do finance companies and banks always apply this clause?
A. They always reserve the right to apply it, but they do not always do so. It generally depends on the risk they assess for the transaction. As a rule, the official finance companies of the brands always apply it.
Q. How long does it take to cancel a retention of title and how much does it cost?
A. The process can take between 2-4 weeks. The total cost is usually between 20-30 euros in fees and procedures. Some companies offer to handle it faster, in 48 hours, for around 100 euros.
Q. How do I know whether my second-hand car has any retention or outstanding charge?
A. It can be checked easily by requesting an official extract for the vehicle or a title report. This confirms any possible charges existing on the car.
Q. If I finished paying for my car a long time ago, can I sell it directly?
A. No. Even if it has been paid for in full, it is necessary to explicitly cancel the retention of title before any sale or transfer of the vehicle.
Q. Can I cancel the retention of title of a deceased family member?
A. Yes. The legal heirs must prove their link to the deceased owner and can manage the cancellation of the retention without any problems.
In conclusion, before buying or selling a financed car it is essential to make sure its legal status is correct, with no outstanding charges, to avoid later problems. Being well informed and using specialist companies can help in these cases.
