Buying a car with a lien on the title is possible, but it requires extra caution. A lien means the seller hasn’t fully paid off their car loan, and the lienholder (usually a bank or financial institution) has a legal claim to the vehicle. Before completing the purchase, it’s important to research the lien, understand your options, and document the transaction properly.
Key Takeaways
- Identify the lienholder (bank, credit union, or individual).
- Decide whether the seller pays off the loan, you pay off the loan directly, or you take over the loan.
- Consider using a legitimate escrow service to protect your payment until the title is properly transferred.
Can You Buy a Car with a Lien?
Yes, private sales of cars with liens are possible. However, the lienholder must be involved to release the title once the loan is paid off.
How to Buy a Car with a Lien
1. Check the lienholder
- Get the car’s VIN and check your state DMV records or ask your lender to perform a lien search.
- Confirm the lienholder’s name and the outstanding loan amount.
2. Ways to proceed
Seller pays off the loan
- Ask the seller to pay off the remaining loan before selling.
- The lender then releases the title, making the sale straightforward.
Buyer pays off the loan directly
- You can pay the loan balance directly to the lender, removing the lien.
- Ensure this is documented in writing and agreed to by all parties.
Taking over the car loan
- Some lenders allow a loan transfer, but credit approval and fees may apply.
- Check with the lender before agreeing to take over the loan.
Using an Escrow Service
An escrow service protects the buyer’s payment until the title is transferred. Make sure the service is legitimate by checking with regulatory authorities like the Consumer Financial Protection Bureau.
Insuring a Car with a Lien
- You must have state-required auto insurance, even in private sales.
- Lenders usually require comprehensive and collision coverage if you take over the loan.
- Having a lien does not automatically increase insurance rates.
👉 Bottom line: Buying a car with a lien is doable but requires careful research and documentation. Confirm the lienholder, decide on the payment method, and consider using an escrow service to ensure a safe transaction.
