How can I verify whether a car is on loan?

I want to make sure the next used car I buy is free and clear of any prior loans.

“This is an excellent question, particularly if you are looking to buy your car in a private sale.
First, you should ask for all paperwork related to the vehicle. At minimum, this should include a copy of the title and the registration. The title will say whether there are any liens on the vehicle, which are like legal bookmarks that enable a lender to repossess a car if the borrower stops paying on their auto loan.
Second, go online to the state DMV website and look for a “VIN check” feature. You will need the vehicle identification number (VIN), which you can get either from the title or a metal tag that is on the dashboard on the driver’s side. (Pro tip: wherever you get the VIN, take a picture of it with your phone so you don’t risk missing one of the 17 alphanumeric characters.)
If your state DMV doesn’t have this function on their website, you can go to your local DMV office and check the VIN there. This process will alert you to any liens on the vehicle.
Third, if you find that there is an active lien on the car, the seller must pay off the loan and obtain a release from the lender, confirming that the lender no longer needs a claim on the car since the loan has been paid. Even if the seller shows you the lien release, which the lender sends to the borrower and the DMV, if the DMV has not yet updated the title and removed the lien, the vehicle should not be considered free and clear.
If the DMV is experiencing delays or has simply made the mistake by not updating the title, the seller can address this problem by going to the DMV office with proof of their lien release.
Caution is important in a private sale. If the seller hesitates to show you documents or confirm that they have resolved their lien with the lender, don’t buy the car. Likewise, if you don’t see a title or if you notice that the VIN plate on the dashboard is either missing or illegible, that too is a red flag.
Finding out about a lien after the fact is gut wrenching, since you are the owner of the car and you become responsible for the outstanding loan balance. “
Jim Donaher
Answered on Apr 08, 2021
Jim Donaher is a freelance writer and manager with over 35 years' experience in the insurance, banking, and investment management businesses. He provides expertise on a range of topics and is able to explain complex industry information in layman's terms. Jim is the author of two books, including Call Him, He's Home: A Guide to Prayer for Regular People and Then Larry Smiled, a novel about life, death, accountability, and salvation. Taormina, Sicily is his happy place!

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