If a car has a lien, that means an entity other than the car buyer has a legal right to the vehicle. This entity is usually the lender—for example, a financial institution like a bank or credit union—to which the car buyer still owes money. Once the car loan is paid in full, the lien will be removed and the car title will be transferred to the car buyer.

If you’re considering buying a used car from a private party rather than a dealership, make sure you do the proper research beforehand. If the auto loan hasn’t been paid off by the owner, the lender or lienholder will remain in possession of the title. That means you won’t be able to complete a title transfer to put the car in your name until the debt is cleared.

Fortunately, buying a car with a lien is not impossible. But it does involve more work. The first step is using the vehicle identification number (VIN) to check with the Department of Motor Vehicles or obtain a vehicle history report to

see if there’s a lien

on the vehicle you’re interested in.

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If there is, the experts at

Jerry

, the licensed

car insurance

broker and

trusted insurance comparison app

, are here to walk you through how to buy a car with a lien. Let’s get started!

What is a car lien?

car lien

is a contract between the borrower and the lender’s office. When agreeing to finance a car, a car buyer signs a contract at the time of the car sale stating that they’ll make a series of loan payments until the payoff amount of the loan is reached.

A lien makes the lender the legal owner of the vehicle until the loan amount is fulfilled. When the loan balance is zero, the lender will send out an official lien release and the vehicle title can be transferred to the car owner.

Failure to fulfill outstanding car payments with a lender can have catastrophic consequences. Aside from seriously hurting the borrower’s

credit score

, the lender can

repossess the vehicle

after several missed payments. They’ll simply arrange for a towing company to locate the vehicle and haul it away.

Lenders often offload repossessed vehicles by auctioning them off at a lien sale. So, if you took out a loan to buy a car and are having trouble making regular payments, consider refinancing your car loan in order to lower the monthly cost.

MORE:

How to get a repossessed car back

Can you buy a vehicle with a car lien?

Yes, you can technically buy a vehicle with a car lien. But you’ll need to take some extra steps to make sure you’re not getting a raw deal.

If a used car you want to buy has a lien, you won’t have access to the title. That means you’ll have issues with

vehicle registration

and obtaining license plates to get it legally on the road. It will also be much more complicated to get an insurance policy for the vehicle.

In a perfect world, the private seller of a used vehicle would be up front about the fact that the vehicle they’re selling still has a lien, but this isn't always the case. So ask for the car’s vehicle identification number in order to check for a lingering lien on any vehicle you’re interested in purchasing—it’s your legal right.

When you have the VIN, you could check with a source like Carfax to see if a lien is listed on the vehicle. Or, it might be more accurate to look directly on the DMV website, as this information will be the most current.

If there is a lien, there are a few different courses of action to take before officiating the purchase. Let’s go over those options.

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The seller pays off the loan

The honorable thing for the seller to do is to satisfy the loan balance before you buy the car, that way the vehicle will have what’s known as a clear title. Of course, this isn’t possible if the seller doesn’t have the funds to pay off the loan.

You pay off the loan

Another option is to take your car-buying money and pay it directly to the lienholder. You’ll need to contact the lienholder first to confirm the amount left on the loan and determine if it’s a number you’re prepared to work with.

You take over the loan

If you agree to take over the remainder of the car payments on the vehicle, the seller will need to talk to the lienholder about it. The lienholder can reserve the right to decline your offer to take over the loan. Having a low credit score is a common reason for the lender to stop this plan in its tracks.

But, if the lienholder gives the go-ahead, it’s up to you to coordinate with them on how you intend to satisfy the rest of the payments. If you have enough cash to cover the cost, this could be the simplest way to close the deal. Otherwise, you may have to take out your own loan to cover the expense.

Buying a car with a lien? Proceed with caution

Private vehicle sales

are riskier than when you trade in your old model for a new car at the dealership. Not only do you need to do your homework to make sure the vehicle you want to purchase doesn't have any dark secrets—like a lien—but it often means doing business with a total stranger.

To keep your hard-earned money secure, consider purchasing a used vehicle through an escrow service or putting it into an escrow account. This is a third-party service that makes sure the buyer gets the car and the seller gets the funds. It’s also very important that you receive a bill of sale when you purchase a car through a private party.

MORE:

Car insurance for used cars

How to find cheap car insurance for your used car

Once you’ve settled on the used car that feels right, you’ll have to think about

car insurance

. We understand if you assume that coverage is going to be super expensive, but we’re also here to help you find an affordable policy—without having to spend an entire afternoon gathering individual quotes.

When you shop for car insurance with

Jerry

, the

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See a policy that looks good to you? Give it a tap and Jerry helps you get enrolled with your new provider, right down to assisting you with canceling your existing coverage. The average Jerry user saves $800+ on their annual coverage!

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FAQs

Can you take over someone’s car loan?

It depends. The person with the lien will need to contact the lienholder to see if they’ll allow you to take over the payments. Sometimes the lienholder prohibits that from happening, especially if the person taking over the loan has bad credit.

What does having a lien mean?

A lien is a contract between the borrower and lender that’s signed when you agree to finance a vehicle. The lender is usually a bank or credit union, and they technically own your vehicle until you pay off your loan.

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