Buying a car with a lien Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering interactive tools and financial calculators, publishing original and objective content. We also allow you to conduct research and compare information for free – so that you can make sound financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The products that are featured on this site come from companies that compensate us. This compensation could affect how and when products are featured on this site, including for instance, the sequence in which they be listed within the categories of listing, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. However, this compensation will not influence the content we publish or the reviews that you read on this site. We do not contain the entire universe of businesses or financial offers that may be available to you. Alfa Photostudio/Shutterstock
3 min read Published on October 27, 2022
Writer: Holly D. Johnson Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal finance, credit cards as well as loyalty and insurance issues. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and many more. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances through providing concise, well-studied information that breaks down complex topics into manageable bites. The Bankrate promises
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We are compensated in exchange for placement of sponsored products and, services, or through you clicking certain hyperlinks on our website. This compensation could impact how, where and when products are listed in the event that they are not permitted by law. This is the case for our mortgage home equity, mortgage and other products for home loans. Other elements, like our own rules for our website and whether or not a product is available within the area you reside in or is within your own personal credit score can also impact the manner in which products are featured on this website. Although we try to offer an array of offers, Bankrate does not include information about every credit or financial product or service. If you’re considering purchasing an used vehicle through a private seller, find out whether the vehicle still has a lien on it from a lender. This could make the purchase more difficult but not difficult. This will require additional steps to make sure the lien is removed prior to the transfer of title to you. What exactly is a car loan? A car lien lists that the car loan lender as the principal beneficiary in the title. It’s a contract which acts as a protection for the lender when a borrower is in default. The lienholder could make use of the lien as a basis to repossess the vehicle, which is why it is considered . Once an automobile loan is completely paid off, the lienholder is removed from being liable for the loan and the vehicle is now owned by the lender. The impact of a lien on your car purchase When you purchase a car with an attached lien, make sure that the lien is gone before you make the final payment. If you’re purchasing the car by cash and pay cash, you may be able to negotiate directly with the lienholder to pay the amount yourself. Start by contacting the lienholder in question to find out the total amount due to get the car released and other conditions which could impact the sale. You can then negotiate directly with the buyer. They will likely prefer to sell the car for a profit, but when you know the purchase amount, you might be able to negotiate an excellent deal and avoid paying more than what the car is worth. If you’re buying with an loan The process of getting a loan of your own to pay for the purchase should be relatively simple. You may share the details of the purchase with your lender to facilitate payment to the lienholder. The remainder , should there be anygoes towards the vendor. After the lien is paid in full, you as well as your lender will receive the title to register the vehicle in your name. The lender will be listed as the lienholder new until you . If the seller repays the loan prior to the purchase, the sale will go ahead more smoothly if the seller of the vehicle settles his auto loan and obtains the title prior to selling. However, this option isn’t feasible for certain individuals, especially those who owe thousands of dollars for a newer car or those who owe more than what the vehicle is worth. If, for example, the seller owes $20,000 on an automobile that is sold privately for $17,000, they’ll still need be liable to the lender $20,000 — $3000 more than what they’ll receive from the sale. In such cases the seller can choose to transfer the remaining amount of the auto loan into an unsecured loan such as an individual loan or a personal loan, to get the auto loan cancelled. Make the purchase official However you deal with this scenario ensure that you draft a contract that addresses how the lien will be disposed of or transferred. Although it’s not required in all states, it is still an excellent idea to draft an invoice of sale that outlines the transactions. Make sure that it is dated and signed by both parties so everyone has a record of the sale. You might be able to use a third-party an escrow company to manage the financial aspect of the transaction. Escrow services can help ensure that the funds to be transferred securely. Make sure you are aware that escrow providers charge fees for their services -and then set up the service with the seller to make sure you are both using a legitimate company. What can you do to determine if the car you’re buying is a lien? Ask the seller — they should be transparent about the car’s ownership. You may also look up the VIN or title, as well as the vehicle’s history report to confirm the seller is being honest. Find the identification number of the vehicle (VIN) at your state’s DMV. If there is a lienholder on the title or registration, the DMV will be able inform you. A title search can give you information on liens. The is a good place to start looking for lienholder details. Check the history of your vehicle in addition. Autocheck or Carfax are both well-known companies that list lien history alongside previous maintenance, damage and owners. The bottom line There are many instances where buyers purchase a car with a lien from an individual without having any issues or challenges. To ensure that the process runs smoothly and avoid major problems, know what steps to take to get rid of the lien. Also, you should research the cost and arrange your own auto financing and ensure that any agreements you enter into with a private seller writing. Learn more
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Written by Author, Award-Winning Author, Award-Winning Writer Holly Johnson writes expert content on personal finance, credit cards as well as loyalty and insurance issues. As well as writing for Bankrate and CreditCards.com, Johnson writes for clients on a regular basis that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to take control of their finances through providing clear, well-researched details that cut complex topics into manageable bites.
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