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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 smarter financial decisions by providing you with interactive tools and financial calculators that provide objective and original content, by enabling you to conduct research and compare information for free and help you make sound financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site come from companies that compensate us. This compensation may impact how and when products are featured on this site, including, for example, the sequence in which they appear within the listing categories in the event that they are not permitted by law. Our mortgage, home equity and other home lending products. However, this compensation will affect the content we publish or the reviews that appear on this website. We do not cover the vast array of companies or financial offerings that could be accessible to you. Alfa Photostudio/Shutterstock

3 min read Published October 27, 2022

Written by Holly D. Johnson Written by an award-winning author, writer and author Holly Johnson writes expert content on personal financial, credit card as well as loyalty and insurance issues. In addition to writing for Bankrate and, Johnson does ongoing work for clients which include CNN, Forbes Advisor, LendingTree, Time Magazine and many 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 the confidence to control their finances through providing clear, well-researched information that breaks down complex topics into manageable bites. The Bankrate promise

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There are money-related questions. Bankrate can help. Our experts have been helping you manage your money for more than four decades. We continually strive to give our customers the right guidance and the tools necessary to make it through life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and precise. Our award-winning editors and reporters provide honest and trustworthy content to help you make the best financial decisions. The content we create by our editorial staff is honest, truthful and uninfluenced through our sponsors. We’re honest regarding how we’re capable of bringing high-quality information, competitive rates and helpful tools to our customers by explaining how we earn money. is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products and, services, or through you clicking certain hyperlinks on our site. Therefore, this compensation may impact how, where and in what order items are listed and categories, unless it is prohibited by law. We also offer mortgage home equity, mortgage and other products for home loans. Other factors, like our own proprietary website rules and whether the product is offered in your area or at your own personal credit score can also impact the way and place products are listed on this site. While we strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit product or service. If you’re thinking of buying an used vehicle from a private dealer check whether the car is still under a lien attached to it by a lender. This can make the purchase more complicated — but not difficult. It will mean taking additional steps to ensure the lien is cleared prior to the transfer of title to you. What is a car lien? A car lien lists that the car loan lender as the principal owner of the title. It’s a legal document that serves as a safeguard for a lender when a borrower is in default. The lienholder may make use of the lien as a basis to take possession of the vehicle which is why they the lien is regarded as . When an auto loan is paid in full and the lienholder has been free of being liable for the loan and the vehicle is now owned by the lender. The impact of a lien on your purchase of a car When you buy a car that has an attached lien, make sure that the lien is gone before you finalize the payment. If you’re buying with cash When you pay in cash, you might be able to negotiate directly with the lienholder in order to pay the balance yourself. Begin by calling the lienholder who is currently in charge to determine the total amount due to get the car released and other conditions which could impact the sale. Negotiate directly with the buyer. They’ll likely want to sell the car for a profit, but If you know the payment amount, you may be able to secure an excellent deal and not pay more than the vehicle is worth. If you’re buying the car with a loan getting the loan of your own to pay should also be fairly simple. You may discuss the details of your acquisition with the lender to make it easier for payment to the lienholder. The remainder , should there be anygoes towards the vendor. After the lien is fully paid, you or your lender will be issued the title and be able to identify the vehicle under your name. Your lender will be identified as the lienholder new until you . If the seller is able to pay off the loan prior to the purchase, the sale can proceed more easily if the seller of the vehicle settles his auto loan and gets the title prior to the sale. However, this option isn’t possible for some people particularly those who owe thousands of dollars for a newer car , or those who owe more than the vehicle is worth. If, for example, the seller owes $20,000 for the car which is privately sold for $17,000, they will still be required make payments to the lender $20,000 — $3,000 more than they’re getting from the sale. In such cases, the seller may choose to convert the remaining auto loan into an unsecure loan, like a personal loan for the purpose of have the auto loan be discharged. To make the purchase legal, however you decide to handle the situation make sure you create a contract that addresses the method by which your lien is eliminated or transferred. Although it’s not mandatory in every state, it is still recommended to prepare the bill of sale which outlines the transaction. Be sure it’s date-stamped and executed by both parties so that everyone has a record about the purchase. It is possible to utilize a third-party escrow service to handle the financial aspect of the transaction. A escrow service can make sure that the cash to be transferred in a secure manner. Make sure you are aware that escrow firms charge charges for their servicesand you should set it up with the seller in order to ensure that you’re using an authentic business. How to check whether the car you’re buying has a lien Ask the seller – they should be transparent about the car’s ownership status. It is also possible to check the VIN or title, as well as the vehicle’s history report to verify that the seller is being honest. Check the vehicle identification number (VIN) at your state’s DMV. If there is an owner of the lien on the title and the DMV will be able inform you. A title search will also provide you with information about liens. It is a good start point for finding lienholder information. You should also get a car history report in addition. Autocheck as well as Carfax are two well-known firms that provide lien history in addition to previous maintenance, damage and owners. The bottom line There are plenty of instances when buyers purchase a car with an unofficial lien from an individual without having any difficulties or problems. To ensure the process goes smoothly and avoid major problems, know what steps to take to clear the lien. Also, you should research the cost, line up your own auto financing , and have any agreements you sign with a private vendor in writing. Learn more


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 articles for Bankrate and, Johnson writes for clients on a regular basis including 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 the confidence to control their finances through providing clear, well-researched details that cut otherwise complicated topics into digestible pieces.

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