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On a day-to-day basis, the fact that there’s a lien on your car may not even cross your mind. But a car lien may affect the auto insurance coverage you’re required to carry as well as the sales process if you decide to sell your car.
For example, if you decide to sell privately, you’ll need to pay off your car loan to get the lien removed from the car title so that the title can be transferred to the buyer.
Let’s take a look at who typically holds a lien on a car, how to buy or sell a car with a lien and where to find lien information.
Who holds a lien on a car?
Your auto loan lender is usually the lien holder on your car and may hold the car title. Depending on the state, the lien holder will file the lien with your state’s transportation agency or department of motor vehicles. Once your car loan is repaid, the lien holder typically sends a lien release document (depending on the state) to the state transportation agency so that the title of the car can be updated and transferred to you.
As the legal owner of your vehicle, a lien holder has several rights. First, it can repossess your car if you default on your loan. And to further protect themselves, lien holders can require you to have certain types of auto insurance coverage — typically comprehensive and collision coverage — until you pay off your loan.
In some states, a mechanic may also be able to place a lien on a car. In some states that allow mechanic’s liens, mechanics can place a lien on a car when they perform work and aren’t paid for it within a specific amount of time.
Buying or selling a car with a lien
If you’re buying a used car from a private party and they don’t own the car outright, you typically won’t be able to get the car title until the seller pays off their car loan and the lien holder transfers the title.
Similarly, if you’re planning to sell your car, you’ll likely need to pay off your loan so that you can get the title transferred to you and you can, in turn, transfer it to the buyer.
If you live in a non-title-holding state, you — not the lien holder — will have possession of the title. Depending on your state, the lien holder’s information may appear on the title and it might need to take certain actions to release the lien once you pay off your loan. For example, in New York, the lender should provide a release of lien when you pay off your car loan in full. That document must be attached to your title before you can sell the car.
If you can’t afford to pay off your car without selling it first, contact your lien holder. The buyer may be able to make the check out to your lien holder for the remaining loan amount to pay the loan off, and then get the car’s title in return.
Where can I find lien information?
Before you buy a used car from a private seller, you’ll want to check its lien status. There are a few ways you can do this.
- Check with your state’s transportation agency. Some state DMV websites allow you to complete online lien searches using the car’s vehicle identification number, or VIN. This 17-digit number is located on the lower left side of a car’s windshield, inside the hood, on the engine or where the driver’s side door closes. It might also be on the car’s registration card and insurance documents.
- If you have it, look at the car title. If there’s a lien on the car, the car’s title might list the lien holder.
- Get a vehicle history report. A vehicle history report can provide a lien history, as well as key info on things like odometer readings, any previous owners or major damage — all important to know if you’re planning on buying the car. Vehicle history report providers include the National Motor Vehicle Title Information System, Autocheck and Carfax.
If you own a car, it’s important to know who your lien holder is (if you have one) and any requirements it has — like insurance coverage you must carry or steps you’ll need to take if you plan to sell the vehicle.
If you’re planning to buy a car from a private seller, be sure to check whether the car has a lien. If it does, ask the seller — or contact the lender directly — to find out what to do to get the title transferred to you.