Can I Sell a Car With Lien on It?
Quick Summary
- A lien is placed on your vehicle when you borrow money to finance your vehicle purchase.
- The car lien allows the lender to stay in possession of the title until your loan is paid off.
- To sell your vehicle, you will need to pay off the loan and get permission to sell from your lender.
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WILL I BE ABLE TO SELL MY CAR WITH A LIEN STILL ON IT?
Good news! You are still able to sell your vehicle while it is under a lien. There are many ways to do so, like going through a private buyer or shopping at a car dealership.
When it comes time to sell your car and you still owe money on it, do some research to figure out how to get the best deal for your vehicle. If you choose to do a private sale, think about using an escrow account to further protect yourself.
Keep reading to learn more about selling your vehicle with a lien on it and the steps to take to ensure a seamless process!
HOW TO SELL YOUR CAR WITH A LIEN ON IT
Selling your vehicle while it is under an auto lien is possible. There are a few steps you need to take to make sure everything goes according to plan.
Talk to Your Lender Directly
First, contact your lender to request your payoff amount. The total sum given to you will be what is required to resolve the lien and will include interest accrued. Your payoff amount may look different than your current loan balance because of any fees or penalties due.
Roll Over the Loan
When purchasing a new car, your lender may allow you to roll over your current loan’s remaining balance into your new vehicle’s loan. If you’re underwater with your current loan, this can be a helpful option, but proceed with caution. Taking this approach increases the total debt on your new car.
Evaluate Your Car’s Market Value
Knowing your vehicle’s market value is essential during this process. Check resources such as Kelley Blue Book, Edmunds, or NADA to understand your vehicle’s value. Compare this number to your payoff amount and determine if you owe more than the car is worth or if you have equity.
Pick The Best Method to Sell the Car
Next, determine the best way to sell your vehicle. With a lien on your car, a dealership will likely be the simplest option. While a private buyer may offer you more, the process can be a bit more complex.
- Private Sale: Selling your vehicle privately often gives you the highest price but it can require your buyer to work directly with your lender to clear the lien.
- Trade-In: Most dealerships will pay off your current loan when you trade your vehicle, giving you more equity in your new purchase.
- Sell to a Dealer: This option may offer less, but it will help you sell your vehicle quickly.
New Buyer May Be Willing Pay the Balance
If you go the private seller route, be transparent about the amount you owe on the vehicle to avoid any issues with the sale.
Let them know about the lien and explain what steps to take to successfully transfer the title. The buyer will need to be comfortable working with your lender to pay off the lien or finance the vehicle themselves. The buyer may choose to take over your loan’s remaining balance, which requires approval from your lender. If the buyer is approved to have the lien transferred, they will assume responsibility for the loan.
Pay Off the Lien Yourself
Paying off the lien yourself before selling your vehicle may be the necessary option.
Once you find a buyer, use the proceeds from your sale to satisfy the lien. When you’ve paid off your lien, request a lien release letter from your lender to confirm your lien has been completely satisfied. This document will be essential for transferring your title.
SELLING CAR WITH A LIEN TO AN AUTO DEALER VS SELLING PRIVATELY
Sell the Car to a Dealer
Most dealerships will offer to satisfy your loan when you trade in your vehicle or sell your car to them.
The dealership will handle the paperwork on your behalf and directly pay your lender the outstanding balance. If your car’s value is greater than the loan balance, you may receive the difference in cash, or you may have to pay out of pocket if the value is less than the remaining balance.
Sell the Car Privately
Selling a car with a lien to a private buyer is a more complicated process, but can be rewarding if your vehicle is worth more than you owe. Here’s how to go about it:
- Negotiate with the Buyer: Be open and honest with the buyer from the beginning. Some buyers may be willing to wait until you pay off your loan balance, especially if they’re getting a good deal on your vehicle.
- Close the Sale at the Lender’s Office: You can arrange to meet the buyer at your lender’s office to complete the transaction. In this case, the buyer can pay you directly and you can immediately satisfy your loan to release your title to its new owner. Your lender may even help with the paperwork to transfer the title.
- Use an Escrow Service: To facilitate the transaction, considering using an escrow account. This way, the buyer can send their payment through the escrow service, which will hold the funds until the lien is satisfied and the title is released. This option adds a layer of protection for both parties involved.
THINGS TO CONSIDER
Be Honest
If selling privately, always be open and honest if you still owe money on your car.
Transparency is key here, so disclose the lien as soon as possible and discuss the necessary steps for transferring the title. For the transaction to go smoothly, the buyer will need to be comfortable with working with your lender to clear the lien or finance the car themselves.
Legal and Financial Considerations
- Understanding Deficiency Balances: If your car sells for less than the payoff amount, you’ll have to cover the difference yourself. Your lender may offer refinancing or settlement options to manage this amount.
- Tax Implications: In some states, selling a vehicle with a lien may have tax implications. If the sale exceeds the original purchase price, capital gains tax may apply, but this is rare when it comes to vehicle sales.
- Protecting Yourself Legally: Ensure all documents are filed correctly and the lien is released officially. Keep copies of all your transactions and any communications with both the buyer and your lender.
Possible Challenges
- Negative Equity: You may need to bring cash to the table to complete the sale of your vehicle, if you still owe on your loan. You can negotiate with your lender for a short payoff period or refinance the loan.
- Finding a Buyer: Not all buyers are comfortable purchasing a car with a lien, so transparency and honest communication are imperative. Be as clear as possible during the process and highlight the benefits of your vehicle to showcase its value.
- Delays in Lien Release: Lien release delays can hold up the release of your title. Remain in close contact with your lender during the process to make sure your lien is released as soon as possible after payoff.
YOU CAN SELL A CAR WITH A LIEN, JUST KNOW IT WILL TAKE A BIT OF EFFORT
Selling your car while it is still under a lien can be complicated, especially if you try to sell to a private buyer. Before attempting to sell your vehicle, talk to your lienholder or lender to see what is allowed under your contract and what the process may look like for completing the sale and transferring the title.
If you’re having difficulty finding a private buyer willing to purchase a vehicle with a lien, you may want to hold off on the sale until you can satisfy your loan. If you’re having issues selling or trading your vehicle with a car dealership because you owe more than your vehicle’s value, you may also want to wait and build some equity in your car. You can accomplish this by making extra payments or paying a higher amount than what is due each month.
Before doing so, check with your lender to see if you will be charged a prepayment penalty fee.
ALREADY HAVE A TITLE LOAN OR TITLE PAWN WITH ANOTHER COMPANY, AUTO MONEY CAN STILL HELP YOU!
If you have a title loan or title pawn with another company, Auto Money may pay it off at a lower interest rate!
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FREQUENTLY ASKED QUESTIONS
Will my car lender allow me to sell my car if I still have a balance I owe?
Possibly, yes!
It’s common for a dealership or lender to allow you to sell or trade your car with a balance still due.
Before beginning this process, discuss the stipulations of your contract with your lender to ensure you have the ability to do so. You’ll need to know your exact payoff balance – which is different from your outstanding balance on your billing statement – and confirm whether or not your lender charges a penalty fee for early payments.
Call your lender to request your payoff amount and talk through the process of selling your vehicle.
Can I sell my car I owe money on to a car dealer?
In most cases, yes. Selling to a dealer when you have a lien is typically the simplest option. Since private buyers cannot buy the vehicle until the lien is satisfied, a dealership can. This makes the process for the seller quick and easy!
When selling my car, can I legally have the new car buyer take on the remaining balance until the lien is paid?
Yes, you can! If you find a buyer who is willing to pay off the loan, then you can legally sell the vehicle to them. When you list your car for sale, be sure to include the fact that you title has a lien on it and the loan must be satisfied.
You can accomplish this one of two ways:
1) The new buyer agrees to pay the remaining balance or
2) you open an escrow account. If the buyer goes with option one, the buyer will pay the lien and your lender will release the lien and transfer the title. Option two protects both you and the buyer, as it allows the buyer to send the payment, and once the title is released, your share of the payment also gets released to you. This can help guarantee the sale.
There are advantages and disadvantages to either option, so determine the best course of action for you and the new buyer.
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ALREADY HAVE A TITLE LOAN WITH ANOTHER COMPANY, AUTO MONEY CAN STILL HELP YOU!
If you have a title loan or title pawn with another company, Auto Money may pay it off at a lower interest rate!
Interested?
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A title loan is a quick and easy way to get the cash you need, using your vehicle’s title for collateral instead of your credit score. The amount will be determined by our expert appraisers. Auto Money offers competitive interest rates and gives you the most money for your title with instant approval. And the best part is, you get to keep driving your vehicle!
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