How to Sell a Car with a Lien
You can sell a car with a lien to a dealership or a private party—but you’ll have to take some extra steps to make sure the lien is released from the vehicle first.
Written by Jacqulyn Graber
Reviewed by Jessica Barrett
Table of Contents
- Can you sell a car with a lien?
- Option 1: Selling your car to a dealership
- Option 2: Selling your car to a private party
- The bottom line
- FAQs
Load full table of contents
The process of selling a car with a lien depends on where you sell it. You’re likely to get more money from a private sale, but you’ll need to sort things out with the lienholder first. Selling your vehicle at a dealership or using it as a trade-in could be less of a hassle.
A
car lien
is created as soon as you finance a car through a lender. The lender holds the car's certificate of title
and is considered the legal owner of the vehicle until the loan is paid in full. The lien protects the lender and allows them to repossess the car if you stop making monthly payments.But if you want to sell your vehicle before your car loan is completely paid off, it’s absolutely possible. Let’s discuss the ins and outs of selling your car with a lien. We’ll go through dealership trade-ins and private party sales, so you can get rid of your old wheels and into a new car as fast as possible!
Can you sell a car with a lien?
Yes—selling a car with a lien is absolutely possible. However, because the lienholder (typically your auto loan lender) has a legal claim over your car, the selling process is a little bit more complicated.
Speaking generally, you have two options: selling your car to a dealership or selling your car to a private party. Dealership sales are often simpler, but you’ll likely get less money than if you seek out a private buyer.
Let’s dive into the details.
MORE: Trade-in vs private sale: What’s the best way to sell your car?
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Option 1: Selling your car to a dealership
Trading in or selling your car to a dealership will typically get you less money, but the sale process will be much smoother.
The first step you should take is contacting your lienholder. Ask your lender’s office what your outstanding balance is, also known as your payoff amount. That’s how much money you’ll need to make in the sale in order for a lien release to occur. Once the loan balance is paid off, the car’s title will reflect your name only, certifying that you are the legal owner of the vehicle.
When you sell a car at a dealership—or use it as a trade-in—the dealership will likely handle the
title transfer
. They will first assess the value of your car and make an offer. If this amount covers the total amount still owed on your car, then your vehicle’s title will be released. However, your vehicle may have negative equity—which means its
Kelley Blue Book
value is lower than the amount still owed on the loan. If you do happen to be upside down on your loan
, and owe more than the trade-in value, you’ll simply have to pay the difference between your loan balance and what the dealership offers you. If you can’t pay the outstanding balance up front, another option is to add the balance owed to your new loan (if you plan to buy a new car). Essentially, this amount will get added to the sale price of whichever new vehicle you choose to purchase.
Option 2: Selling your car to a private party
Selling a car with a lien to an individual buyer is a slightly more complicated process that may require some extra steps.
Once again, you’ll want to start by contacting your lienholder for the payoff amount. Then, you’ll either need to pay off your loan before you sell your car or find someone who is comfortable paying off your loan balance for you.
If you’re able to pay off your loan balance yourself, the lender will send a lien release document to your state’s Department of Motor Vehicles (DMV) so that the vehicle title can be updated and transferred to you. Once you receive the clear title, you can then transfer it to the person who buys your car.
If you can’t afford to pay off the loan yourself, your lienholder may accept a check from the potential buyer for the payoff amount in return for the car’s title. The simplest way to make this happen is to bring the buyer to the lender’s office to complete the bill of sale together. Once the buyer pays the balance, they’ll receive a new title and become the new owner of the vehicle.
If going to the lender’s office together isn’t possible, you can choose to set up an escrow account where the buyer’s money is held until they receive the title. The escrow service will handle all of the paperwork and make sure the conditions of the sale have been met before the money is released to you. Keep in mind that using an escrow service will typically involve service fees.
Don’t forget—transferring your vehicle’s title isn’t the only step in selling your car to a private party. You’ll also need to visit the DMV together to transfer the
vehicle’s registration
.The bottom line
Liens are totally normal parts of financing your vehicle, and selling a car with a lien is both legal and possible! However, you are required to take some extra steps to make sure your debts are settled and the transaction is handled legally.
If you’re using your car as a trade-in at a dealership—or if you’re selling it right to them—they’ll be happy to walk you through the process. However, if you want to hold out for some more money, we suggest selling your vehicle to a private party. Just make sure you completely remove the lien either before selling or during the transaction.
Either way, the best bet is to contact the lienholder directly. They deal with this kind of stuff all the time and will be happy to assist you every step of the way.
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FAQs
How do you remove a lien from a car title?
The only way to remove a lien from a car title is to pay off the remaining balance of your auto loan. Simply contact your auto lender and ask them for a pay off amount. Once the loan is satisfied, the lender will send a lien release to your state’s DMV.
Is it a good idea to buy a car with a lien?
If you’re purchasing a brand new or used vehicle from a dealership and planning on financing the cost of the purchase, the lender you choose will place a lien on the vehicle until the entire loan is paid off. This is a completely normal process and perfectly safe, as long as you keep up with your monthly payments.
If you’re purchasing a used vehicle from a private seller and it currently has a lien on it, it is important that the lien is paid off when you purchase the vehicle. This means that either the seller or you will have to satisfy the payoff balance with the lender who holds the vehicle’s title.
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