Buying a car with a lien Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering interactive financial calculators and tools that provide objective and original content. We also allow you to conduct your own research and compare information for free – so that you can make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are advertised on this site are from companies who pay us. This compensation may impact how and where products are displayed on this site, including, for example, the order in which they appear within the listing categories, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. This compensation, however, does affect the information we provide, or the reviews that you see on this site. We do not cover the universe of companies or financial offerings that could be accessible to you. Alfa Photostudio/Shutterstock
3 min read Published October 27, 2022
The content is written by Holly D. Johnson Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal financial, credit card, loyalty and insurance subjects. Alongside writing content for Bankrate and CreditCards.com, Johnson is also a freelance writer for clients which 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 passionate about helping readers gain confidence to manage their finances with precise, well-studied and well-researched data that breaks down otherwise complex issues into digestible chunks. The Bankrate promise
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We are compensated in exchange for placement of sponsored products and services, or through you clicking certain links posted on our site. Therefore, this compensation may affect the way, location and in what order items are displayed within the categories of listing, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other home lending products. Other factors, like our own website rules and whether or not a product is available in the area you reside in or is within your self-selected credit score range could also affect the manner in which products are featured on this site. Although we try to offer the most diverse selection of products, Bankrate does not include information about each financial or credit item or service. If you are considering buying an used vehicle from a private seller check whether the vehicle still has a lien on it from an lender. This could make the purchase more difficult but not difficult. It is necessary to take additional steps to ensure that the lien is cleared before the title is transferred to you. What is a car lien? A car lien names that the car loan lender as the principal owner of the title. It is a contract that serves as a safeguard for the lender if a borrower defaults. The lienholder can make use of the lien as a basis to take over the vehicle, which is why the lien is regarded as . After an auto loan is fully paid off and the lienholder has been free of any loan and the car is owned in full by the lender. How a lien affects your car purchase When you purchase a car with a lien, ensure that the lien is gone before you complete the payment. If you’re buying by cash and pay in cash, you might be able to work directly with the lien holder to pay off the balance on your own. Begin by contacting the lienholder who is currently in charge to determine the exact amount needed to get the car released as well as other stipulations that might affect the sale. Then negotiate in conjunction with your seller. They may be looking to sell the vehicle in order to earn a profit. However, when you know the purchase amount, you might be able to secure an excellent deal and not pay more than the vehicle is worth. If you’re buying with a loan Getting the loan of your own to pay off the loan should be fairly simple. You can discuss the details of your acquisition with the lender to make it easier for paying the lienholder. The remainder — if there is any — goes directly to the buyer. Once the lien has been paid in full, either you as well as your lender will be issued the title and be able to record the vehicle in your name. The lender will be identified as the lienholder new until you . If the seller is able to pay off the loan prior to purchase sale is more straightforward if the seller of the car simply pay off his auto loan and obtains the title prior to the sale. But this isn’t possible for some people, especially those who owe thousands of dollars for a newer car , or those who owe more than what the car’s value. For instance, if the seller owes $20,000 on an automobile that is sold privately at $17,000, they’ll still need to pay the lender between $20,000 and $3,000 more than they’re getting through the transaction. In such a case the seller could decide to convert the remaining auto loan to an unsecure loan such as an individual loan, in order to have the auto loan be discharged. Make the purchase official However you handle this situation make sure you write up an agreement that outlines how the lien will be eliminated or transferred. Although it’s not required in every state, it is still recommended to prepare the bill of sale which outlines the transaction. Be sure it’s dated and signed by both parties so everyone is aware of the sale. It is possible to make use of a third party escrow service to handle the financial side of this transaction. An escrow service will help ensure that the money for the sale is transferred securely. Be aware that escrow companies charge charges for their servicesand you should set it up with the seller in order to ensure you are both using a legitimate business. How to check whether the vehicle you’re purchasing has a lien ? Ask the seller – they should be transparent about the car’s ownership. You may also look up the VIN, title and vehicle history report to confirm the seller is being honest. Check the number of your vehicle’s identification (VIN) at your state’s DMV. If there is a lienholder on the title or registration, the DMV will be able tell you. A title search can provide information about lienholders. The is a good place to start looking for the information of lienholders. You should also get a car history report in addition. Autocheck as well as Carfax are two well-known businesses which provide lien history along with prior maintenance, damages and owners. The bottom line There are many instances where individuals purchase a used vehicle with a lien from an individual without having any challenges or issues. To ensure that the transaction goes smoothly and avoid major issues, be aware of the steps to take to get rid of the lien. You should also research pricing, line up your own financing for your vehicle and ensure that any agreements you enter into with a private seller in writing. Learn more
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Written by an award-winning author, writer Holly Johnson writes expert content on personal finance, credit cards as well as loyalty and insurance issues. As well as writing articles for Bankrate and CreditCards.com, Johnson writes for clients on a regular basis that include CNN, Forbes Advisor, LendingTree, Time Magazine and other publications. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with clear, well-researched details that cut otherwise complicated topics into digestible pieces.
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