How to Find Out if a Used Car Has a Lien
One of the most common ways to check for liens is to view the title and compare documentation. You can also use the VIN to locate lien information or purchase a vehicle history report online.
If you are thinking of buying a used car from a private seller, verifying that the vehicle is loan-free is one of the most important steps of the process.
Unfortunately, if you purchase a car with a lien—even unknowingly—you will legally be on the hook for paying the outstanding amount owed to the lienholders.
A lienholder is a lender that legally has an interest in your property until you pay it off in full; therefore lienholders may have the legal right to possess the car if you default on payments.
For this reason, it’s always better to avoid purchasing a vehicle with a lien since you won’t have a clear title until the loan is paid off.
If you are wondering how to verify if a used car has a lien, the car insurance shopping and broker app Jerry has compiled all the information you need to know.
- Who holds liens?
- Used cars and liens
- Resolving a lien
- Buying or selling cars with a lien
- Finding info on a lien
- Finding cheap insurance
Who holds a lien?
Your auto loan lender will usually hold your lien—and may have the title to your car as well.
However, certain other institutions may also have the right to a car lien. Some states will allow mechanics to place a lien on a car if the owner doesn’t pay for work done on the car in an established timeframe.
The government can also put a lien on your vehicle if you don’t pay your taxes on time. A car could also be used as collateral for a financial institution on a mortgage or loan.
If your car has a lien, the lienholder has certain rights that they can enforce. If you default on your payments, the lienholder has a right to repossess your car.
How to find out if a used car has a lien
Here’s how to check for liens on a used car before you officially transfer the title.
Investigate the title
Ask the seller to see the title and scrutinize it for any liens.
States have different requirements for the details that need to be listed on the title. Be sure to locate and carefully read any information related to the current owner, past owners, and any existing or past liens on the car.
Even if you feel confident that there are no liens, ask to see the title anyway. A trustworthy seller will have nothing to hide. If a seller makes excuses or is hesitant to show the title, take it as a red flag and proceed with caution.
Locate any relevant documents
If the title shows that there has been a lien, you will need to make sure that the lien has been paid off before you sign the title.
If this is the case, ask the seller to provide a lien release. A lien release is a legal document that proves that the lien has been paid off and released. Sometimes the lien release will be noted on the car’s title, but some states will require a separate lien release document.
If you decide to purchase a car with a lien against it, be sure to obtain possession of any and all lien release documents after the sale is complete. You will need them to prove that the liens have been released if you want to sell the car later down the line.
Key Takeaway A lien release document is legal proof that a lien is fully paid off.
Check out the paperwork
Never go through with a sale until you have carefully examined the title, current registration, and any relevant lien release documents.
Ask the seller to show you their photo ID to make sure that their information matches up with the title and registration documents.
Remember that private sellers don’t have the same reputation that dealerships have to uphold. If you want to minimize the risk of private car sales, you have to be a diligent buyer. Comparing the paperwork is a good way to establish that the seller is credible.
Match the VIN
The VIN stands for “Vehicle Identification Number,” and it is a 17-digit code of letters and numbers.
You can use the VIN to ensure that the documentation listed on the title and registration match up to the car itself. If you have access, don’t forget to record the VIN for future use.
You can find the VIN mounted on a small metal plate tucked close to the window on the driver’s side dashboard. You might have to get out of the car and look from the outside to read the numbers.
If there is anything off with the VIN, take it as a red flag and walk away from the sale. No numbers should be missing or difficult to read, all 17 digits should be there, and everything should match up perfectly with the number listed on the title and registration.
Key Takeaway The VIN can be used to verify liens and to ensure that the documentation is valid.
Use a title checker tool
Some states provide title checker tools on their DMV or transportation department websites.
If your state provides access, you can use the VIN collected from the car and vehicle documents to verify any information on the title—including whether the car has or has had a lien on it.
If the car title comes up as clear, you don’t need to take any further action. However, if it shows a lien, you will have to request the lien release documents from the seller before going through with the sale.
Don’t let a seller talk you into providing lien release documents after the sale or convincing you that the DMV made a mistake. If the seller has lost their lien release, it is their responsibility to get a new one. Likewise, for clearing up any misunderstandings with the DMV about the payment status of their lien.
Key Takeaway Title checker tools are a quick way and easy way to gain access to any information listed on the title.
Get a car report
Having easy access to online car reports helps make the private car buying process a lot more reliable than it once was. You can use car sites like CarFax, or CarProof to pull up vehicle reports before you buy.
You will have to pay a fee to access a vehicle history report—but it is money well-invested.
Checking out the car’s history before is an easy way to ensure there are no liens against the vehicle. It will also let you know if the car has been in accidents before and if there is any relevant recall information associated with the vehicle.
Head to your local DMV
If your state doesn’t offer an online VIN checker tool, you can visit the DMV in person to request information on the title.
As long as you have the VIN, you should be able to request a report that details the lien information and the car’s accident history. Depending on the state you live in, you might have to pay a small fee to access this report.
You will also have to reach out to the DMV if a seller has proof of a lien release, but the lien release is not noted on the title. While it is the seller’s job to provide lien release documentation, the buyer is responsible for correcting any errors on the title before assuming ownership.
How can I resolve a lien?
If a lien does pop up in any of your different searches, you will want to be sure to resolve the lien before you agree to buy. Likewise, if you discover a lien after you purchase the vehicle. If this is the case, the sooner that you can get the lien dropped, the better.
Pay the lien
Sometimes the DMV makes mistakes—and there’s a chance that the lien is no longer legitimate. However, if the lien is real, the only way to get rid of it is to pay it. If you don’t satisfy the lien, the lienholder has the right to repossess your car.
If you purchased a car with a lien, contact the seller as soon as possible and ask them to resolve it. Unfortunately, they have no legal obligation to pay the lien. If the seller refuses to pay, you might have to pay it yourself. All the more the reason to carefully follow the precautionary steps outlined above before you purchase.
To pay an existing lien, contact the lienholder. They will provide you with an accurate payout amount so that you can pay off any current balance owing. Once the lien is paid off, the lienholder will release the lien and provide you with lien release documentation.
Get documentation from DMV
Once you can prove that the lien has been released, the DMV will notate the lien release on your title so that you have clear ownership of the car.
Depending on your state regulations, you might have to provide proof of your lien release to your DMV. In some states, the lienholder will also have to send a copy of the lien release documentation to your state DMV. In other states, you will have to provide proof to release yourself to have the lien removed from the title.
There might be a small fee for this service.
Key Takeaway If you purchased a car with a lien, you will be responsible for paying the amount owed to the lienholder to release the lien.
Should I buy or sell a car with a lien?
You might be able to sell a car with a lien if you can get the title cleared during the sale transaction - but you should always avoid buying a car with a lien.
After all, you won’t own the vehicle until the lien is paid off. Buying a car that a bank or institution has a right to seize will probably only translate to unnecessary headaches for the buyer.
In states where the lienholder holds the lien, the seller will need to clear their title with the lienholder before transferring ownership to a buyer. However, you might be able to purchase a car with a lien if you live in a non-title holding state.
In these states, the vehicle owner and not the lienholder has possession of the title.
If you need to sell your car to pay off a loan, you can reach out to your lienholder to arrange the transaction.
The buyer will make out the cheque for the remaining payoff amount on the lien to the lender, and the lender will clear the title before transferring it to the buyer.
Key Takeaway In most cases, you want to avoid both buying and selling a car with a lien.
How to find information on a lien
Regardless of what state you live in, you always want to be sure to check the lien status before you purchase a used car.
You can locate the lien from three sources: through your state transportation agency or DMV, by looking at the car’s title, or through a vehicle history report.
For instance, some states may provide liens. You can always contact your state DMV to find out more about how to locate the relevant lien information you need to streamline the process.
Just keep in mind that regulations vary state by state. For instance, some states list lien information right on the title while other states require separate documentation.
You should always ask to examine the title regardless, but you might not always be able to use the title to verify lien status. If this is the case, you can use one of the other methods listed above to verify the status of your lien instead.
Key Takeaway You can use a car’s title, vehicle history report or visit a local DMV to find out more about a lien.
How to find the best insurance for your used car
Liens aren’t the only things that you have to think about when buying a used car from a private seller. Almost all states require that you purchase car insurance before you can drive it off of private property.
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