Can you sell a vehicle with a lien? Sure! But the underlying question is should you sell a car with a lien? And how do you do it? Selling your vehicle is going to be more complicated with a lien, but it’s entirely possible. Not sure if you have a lien, or don’t know what a lien is? Allow me to explain.
When your car has a lien, the lienholder has all the legal rights to your vehicle’s title. For all intents and purposes, that means the lienholder owns your car. You may or may not possess the actual title right now; either way, you will need the lienholder’s signature to sell it.
Some reasons you might have a lien on your car include:
You never paid off the loan
You have unpaid repairs
Your vehicle was used for collateral on a loan
Let’s take a closer look at the options available to you and whether each one is a good idea or not.
Selling to a Dealer
The easiest option is to head to your local dealer and sell them the vehicle. Many places will only consider this if you are purchasing your next vehicle from them. Find out what you owe on your current car and keep that number in mind while negotiating.
When you give the dealer what’s called Power of Attorney, they will then contact your lender and handle paying off the loan directly. You aren’t actually trading in your vehicle because you don’t technically own it. All you are doing is selling it to the dealer who is then satisfying your loan before reselling the car.
The dealer pays off what you owe and then applies the remaining balance toward your next purchase. Of course, this won’t work if you can’t get as much out of it as you owe.
Important Note – don’t ever leave your car with the dealership until you’ve received all the appropriate documentation stating that the lien is satisfied.
Selling to a Private Party
This process requires a little additional work, but it’s completely possible. Many people prefer to put in the extra effort because it’s possible to get more for the vehicle.
Here are some things to consider to ensure a smooth transaction:
Make sure you disclose the lien details right in your listing. Just create the ad as usual, and then add in the lien information.
Attempt to sell in the same location as your lienholder if you can - for example, at the bank that holds the lien.
Once you agree on an amount with the buyer, you can head to the lender and pay off your lien. Then, the ownership can be transferred to that person directly from your financial institution.
You might want to utilize an escrow service if the lender is nearby. This ensures a secure transaction for you and the buyer. This service provider assumes all responsibility for the payments from your buyer and holds the title until everything is complete, adding extra trust and security to the sale process.
Some advantages of using an escrow service include:
They do most of the work for you. This makes the entire process less of a hassle for you.
You are ensured a legitimate and safe transaction. All the paperwork is provided for you.
The cost can be split between the buyer and seller. This makes fraud less likely, because even with liens it’s possible to be scammed.
Allowing Someone to Take Over Your Car Loan
There’s also the option of enabling the buyer to take over your existing car payments. You have two different options here. Simply put, one way is the proper way to handle it and the other is riskier.
The best way to handle this transaction is to meet with the bank and buyer at once. Sometimes the financial institution will allow them to take over, but there’s often a few fees associated with this. It also means that the buyer won’t need a lot of money to get started.
Sometimes, people will sell their car to someone else and just continue to make the payments. This isn’t the way you want to handle your car title lien. First of all, the buyer has to trust you and they don’t possess the title. Furthermore, if the buyer does anything to damage the car or participates in any illegal activity, you’re the one responsible.
What about an Underwater Car Loan?
When you have a high-interest rate or you haven’t paid your payments, you might have an underwater car loan. This means you owe more than the vehicle is worth. It’s also caused by depreciation, but either way, it makes selling a car with a lien even trickier.
First of all, don’t panic. There’s still hope for you. Of course, you aren’t going to receive an instant fix – we can’t perform magic, but with a little work, you’ll be free.
The first option is to keep your car. Try to make larger payments so you can get caught up. Then, sell it when you aren’t underwater anymore.
It’s also possible that you can have the car refinanced. This would lower your interest rate and allow for more affordable payments.
If you must sell your underwater car with a lien, head to the dealership for the best outcome. They can apply the debt you owe to a new car. So, you’ll be paying off your new car and what was owed on the previous vehicle! We recommend opting for something low-cost unless you want to end up in the same situation yet again. Keep in mind dealers can also do this with a new car lease.
Selling Your Underwater Car to a Private Buyer
Of course, this is still an option, but you’ll want the help of Title Gods to get you through this in one piece. The best reason to choose this course of action is to receive more money and lower your loan. Once they pay for the car, you can choose to pay off the difference and transfer the title.
No matter how you sell your car with a lien, you’ll face many legal issues that need to be dealt with properly. Make sure you know what’s expected of you prior to moving forward.
You’ll need documents, such as:
Bill of Sale – This spells out the parties completing the transaction. It will include the price, date and transferred property. It should also contain the VIN and odometer reading.
Release of Liability – This confirms the sale and releases you from any liability. It should also contain the odometer reading and needs to be filed with the DMV as an official record.
Tips for a Smooth Sale
If you want a private sale to go smoothly, we’ve got a few tips for you.
Don’t forget to cancel your insurance coverage. You’ll need the proof that your car was sold. Before you do this, you’ll want to ensure that the new buyer shows you proof of insurance.
Take off your license plates. This also reduces your liability following the sale, but it will save you money on the next car you purchase as well.
Make sure you pay all the fees. Check with your DMV to tell you what’s required when you sell a vehicle. This might include sales tax which can be paid with the final price of the car by the buyer.
Make sure your registration is current. If it isn’t, you might face some trouble after the sale.
We are Here to Help
We don’t want you to sell a vehicle with a lien by yourself. We have walked through this process countless times with other satisfied customers and we know how to get the job done right. If you want top dollar for your vehicle but you aren’t sure of the steps to take, we are prepared to help you.
When you work with Title Gods, you don’t have to worry if all the t’s are crossed and the i’s are dotted. We handle every piece of paperwork for you. Protect yourself from fraud by choosing to use us for all your title transferring needs.
We are not attorneys. This article is not legal advice.