Whether you’re trying to file a lien on someone else’s car or figuring out the lien on your own vehicle’s title, there are a few ways to navigate the process.
If you’re unfamiliar with car liens, they might sound a bit intimidating—but they’re a pretty routine part of car buying and car ownership for most people. That doesn’t mean they’re simple to understand, and all the different state laws can make them even more confusing.
Whether we’re talking leases or loans and their accompanying liens, legal car ownership can get complicated fast. Read on as we demystify the world of car liens. We’ll go over what liens are, how to add one to a certificate of title, and how to buy or sell a car with an existing lien.
How do you add a lienholder to a car title?
Adding a lienholder to a car title is typically straightforward, but the process will differ depending on what state you’re in. By and large, the new lienholder will be the one to file with the state. If there was no lien on the title to begin with, however, the owner might be required to amend it before the new lienholder can be added.
Since every state has different rules and procedures, there’s no one specific route to adding a lienholder to a vehicle title. For the most part, though, you’ll need to contact your state’s Department of Motor Vehicles and fill out the appropriate form(s) to amend the title or start a brand new title application.
This will generally require the following information:
- Vehicle year, make, and model
- Vehicle registration information
- Vehicle identification number
- Original title information
- Contact information of the vehicle owner
- New lienholder information
Once you’ve filled out the proper forms, you’ll turn them in and pay the title fee. After it’s processed, you’ll likely receive the updated paper title with the new lien listed. Many states have electronic lien processes, as well as ways to check your lien status online.
Types of car liens
There’s a good chance your car already has a lien! There are a few cases, however, when you might need to add a lien to an already-titled vehicle that may or may not be yours.
Let’s go over the most common types of car liens and when you’d need to add one to a car’s title.
Financing lien
Financing liens are the most common type of lien. If you’ve ever financed a vehicle, odds are you’ve had a lien—held by the creditor—listed on your vehicle’s title from the time you bought it.
If you financed your car through the dealership, they hold the lien. If you financed through your financial institution, they’re the lienholders. This lien will stay on your vehicle title until you’ve paid off your debt entirely. At this point, the lien will be removed and you’ll officially be the sole owner of the vehicle.
Since a lien is essentially a claim to ownership rights, a financing lien is to ensure that you make payments to the lender to pay off your debt. Without it, the lender has no legal protection if you stop making payments. With a lien, however, they could repossess your car if you fail to make the agreed payments.
Mechanic’s lien
Your financing lender isn’t the only person or entity that can have a lien on your car’s title. If you’ve had your car serviced in some way, the mechanic can file for a mechanic’s lien on your car if you fail to pay them, giving them ownership claims until the debt is settled. These services could include anything from making repairs to towing to selling you parts.
In these cases, a written contract typically isn’t formally necessary to file the lien. If a mechanic is added to a vehicle’s title along with another lienholder, the mechanic’s lien will generally take precedence over the lender’s lien, giving the mechanic the power to keep the vehicle or sell the vehicle after a specific amount of time. A mechanic’s lien can be placed on your title whether the service provider still has possession of your car or not.
Depending on the state, filing a mechanic’s lien may include details regarding:
- How much time has elapsed between the service and nonpayment
- What steps must be taken before filing the lien
- Whether the mechanic is allowed to sell the car as payment for the debt
- How the title holder must be notified of the mechanic’s lien
Child support liens
If a parent with primary custody is owed child support, they can file a lien on the property of the parent who owes money—including their car. There are several ways to do this, and they all depend on your specific state’s laws.
In general, the custodial parent can file a lien on the other parent’s vehicle, house, or other property. Depending on the circumstance, the lienholder can then legally sell the property or wait until the property is refinanced or sold, then collect their debt from the profit. Otherwise, the lien will remain on the title until the custodial parent removes it or the owed child support has been paid in full—even if the child is no longer eligible for support.
The majority of states allow these types of liens to be filed after a missed court-ordered support payment, but some states require an official judgment of the circumstance before filing the lien. Your state’s specific requirements can be found on the Office of Child Support Enforcement’s website.
Buying a car with a lien
Buying a vehicle with an existing lien isn’t impossible, but it will require a bit more work than simply drafting a bill of sale and exchanging payment. If you’re thinking of purchasing a car with a lien, here are some of the routes you might take:
- The seller pays off the loan
- You pay off the loan or lien as the buyer
- You agree for the car loan to be transferred to you and that you will make payments to the lienholder
Of course, the easiest option is if the seller simply pays off the loan before you buy the car. If the seller can’t or isn’t willing to pay off the loan, however, it may be in your best interest to communicate with the lienholder directly before negotiating with the seller. This way you won’t be paying the seller more than is fair.
No matter what course of action you end up taking, it’s a good idea to make sure the lien has been removed before you finalize the purchase unless you’re assuming the loan as part of your purchase.
Selling a car with a lien
If your car has a lien but you’re itching to sell it, you’re not out of luck. There are a few different ways to proceed.
The most straightforward way to do this is to pay off your loan before you transfer the title. Of course, this process also depends on your state’s specific laws. In New York, for instance, the lender will provide a “release of lien” when you pay off your loan. This release must be attached to the title before selling.
In other states, you as the owner may have the title instead of the lienholder, but you’ll probably still have to complete a certain process to release the lien after paying off the loan.
If paying off your car before selling it isn’t a viable financial move for you, talk to your lienholder about your options. They may accept payment directly from the buyer, who will effectively pay off your loan and receive the car’s title in return.
Learn more: How to sell a car for the best price
FAQ
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What’s the difference between a car lien and a car loan?
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How do you remove a car lien from a car title?
Macy Fouse is an insurance writer with over five years of experience in publishing and writing. A specialist in car insurance, car loans, and car ownership, Macy’s mission is to create content that equips car owners with the tools they need to reduce car ownership costs, master repair skills, and ensure they have the best insurance coverage for their drive. Macy has written nearly 1,000 articles for Jerry on topics ranging from state-specific driver’s license regulations to how your marital status can affect car insurance costs. Prior to joining Jerry, Macy leveraged her background in journalism, social media, and educational curriculum as a production editor for LifeWay Christian Resource.
Jessa Claeys is an insurance writer and editor with prior experience writing and editing for finance-focused publications like BiggerPockets and 401k Specialist. A specialist in personal finance and insurance basics, Jessa’s work equips car owners with the tools they need to be more financially-savvy car owners. Jessa has written short-form articles for Jerry on topics ranging from canceling car insurance to dealing with an insurance adjuster.
