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 financial calculators and tools as well as publishing original and objective content, by enabling you to conduct research and compare information at no cost and help you make informed financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that are featured on this site are from companies that compensate us. This compensation can affect the way and where products are displayed on this site, including, for example, the order in which they appear in the listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other home loan products. This compensation, however, does not influence the information we provide, or the reviews you see on this site. We do not cover the vast array of companies or financial offers that may be available to you. Alfa Photostudio/Shutterstock
3 min read Published 27 October 2022
Writer: Holly D. Johnson Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal finances, credit cards as well as loyalty and insurance issues. Alongside writing content for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and other publications. The article was edited 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 the confidence to control their finances through providing clear, well-researched information that breaks down complicated subjects into bite-sized pieces. The Bankrate promises
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Therefore, this compensation may affect the way, location and in what order items are listed and categories, unless it is prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other factors, like our own rules for our website and whether or not a product is available within your area or at your own personal credit score could also affect how and where products appear on this site. We strive 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 through a private seller be sure to determine whether the vehicle still has a lien on it from a lender. This could make the purchase more difficult however, it’s not impossible. It will mean taking a few extra steps to ensure that the lien is cleared before the title is transferred to you. What a car lien is A car lien lists the auto loan lender as the principal owner of the title. It is a contract which acts as a protection for the lender if a borrower defaults. The lienholder could utilize the lien as a basis to take possession of the car which is why they it is considered . Once an automobile loan is completely paid off and the lienholder has been released from any loan and the vehicle is now owned outright by the borrower. The impact of a lien on your purchase of a car When you buy a vehicle with the lien, be sure the lien is gone before you make the final payment. If you’re purchasing the car with cash When you pay in cash, you might be able to negotiate directly with the lienholder to pay off the balance yourself. Start by contacting the lienholder who is currently in charge to determine the amount required to be released from the vehicle and other conditions that might affect the sale. Then negotiate in conjunction with your seller. They will likely be looking to sell the vehicle to make a profit, however If you know the payment amount, you might be able to negotiate an excellent deal and not pay more than the car is worth. If you’re buying with the help of a loan The process of getting an loan of your own to pay for the purchase should be relatively simple. You may discuss the details of your purchase with your lender to make it easier for paying the lienholder. The remainder — if there is any -is paid to the seller. After the lien is paid in full, you either or your lender will receive the title and be able to register the vehicle in your name. You or your lender will be identified as the new lienholder until you . If the seller repays the loan prior to purchase sale is more straightforward when the owner of the vehicle pay off their auto loan and acquires the title prior to the sale. But this isn’t available to certain people particularly those who owe tens of thousands of dollars on a newer vehicle or who owe more than what the car’s value. If, for instance, the seller is owed $20,000 for the car which is privately sold for $17,000, they will still need be liable to the lender $20,000 — $3000 more than what they’ll receive from the sale. In such cases, the seller may choose to the remainder of the auto loan into an unsecured loan similar to one that is a personal loan for the purpose of have the auto loan cancelled. Make the purchase official However you deal with this scenario, be sure to create the contract which outlines the method by which the lien will be disposed of or transferred. Although it’s not mandatory in every state however, it’s a good idea to create a bill of sale outlining the transaction. Be sure it’s dated and executed by both parties so that everyone is aware 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 money to be transferred securely. Just be aware that escrow companies charge fees for their services- and set it up with the seller to make sure you’re both working with an authentic firm. How do you determine whether the vehicle you’re purchasing has a lien ? Ask the seller — they should be upfront regarding the status of ownership. You can also check the VIN as well as the title and history report to verify that the seller’s honesty. Check the number of your vehicle’s identification (VIN) at your state’s DMV. If there is a lienholder listed on the title or registration, the DMV will be able tell you. A title search can also provide you with information about liens. The is a good place to start looking for lienholder information. Check the history of your vehicle in addition. Autocheck and Carfax are both well-known businesses that list lien history alongside previous maintenance, damage and owners. The bottom line is that there are numerous instances where individuals purchase a used vehicle with an unofficial lien from a private party without encountering any challenges or issues. To ensure the process goes smoothly and avoid any major problems, know what steps must be taken to clear the lien. You should also research pricing for your own auto financing and have any agreements you sign with a private seller in writing. Find out more
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Written by an award-winning author, writer Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. As well as writing articles for Bankrate and CreditCards.com, Johnson writes for clients on a regular basis which include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to take control of their finances through providing clear, well-researched details that cut otherwise complex subjects into bite-sized pieces.
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