Can you buy or sell a car with a lien on it?

(iSeeCars) – You may have come across the term “car lien” while buying a car or trying to get a car loan. So what is a car lien and what role does it play in the car buying process? We have the important answers

What is a motor lien?

A car lien is a contract that gives the lien holder the legal right to a vehicle until the borrower pays off the loan in full. All vehicles that are financed have liens on them. This means that if you take out a loan for a vehicle, your creditor is the legal owner of the vehicle and has the right to repossess the car if you fail to repay your loan. In other words, a car lien is an insurance policy for a car loan lender so that they are not liable for payments if the borrower does not pay for their vehicle. Liens can be placed on new cars and used cars.

Who is the lien holder for a car?

An auto lender is usually the lien holder on your car and in most states is in possession of the title to the vehicle. The lender will typically file the lien with the state’s Department of Motor Vehicles.

How do I get my car title after paying off my loan?

When your car loan is paid off in full, the lien holder is required to contact your state’s Department of Motor Vehicles (DMV), either electronically or through the required documents. What happens next varies by state. Some states will automatically send you your car title after your loan is paid in full. In other states, your financial institution will send you a lien release with documentation that the loan has been repaid. You will then need to go to the DMV to get your vehicle title and become the registered owner of the vehicle.

You can learn more about your state’s process by visiting your state’s DMV website.

Does having a lien on your car affect car insurance?

Your car lien holder will likely require you to obtain some auto insurance coverage to protect the creditor if the vehicle is crashed, damaged, or stolen. Your lien holder may also be listed on your vehicle’s insurance policy. After your loan is paid off, comprehensive coverage and collision coverage are likely optional and the lien holder may be removed from your policy.

Can I buy a car with a privilege?

If the seller of the car is unable to repay their loan, they can sell the car as long as it still has a lien. If you plan to buy a car with a lien through a private party, you’ll want to make sure the lien is removed before you become the new owner. You can work directly with the lien holder to determine how much to pay off the car, and you can either pay cash or get a loan from a lender. If you take out a loan, your lender will complete the lien holder repayment process and a loan for the vehicle will be placed in your name.

How to sell a car with a privilege?

If you want to sell your car with a lien, you must first contact your lien holder to find out the loan repayment amount. Your lien holder can also walk you through the process of selling your car to a private seller. In a private sale, you will either have to pay off your loan before you sell, or find a buyer who will pay off your car loan for you.

Because it can be difficult to find someone willing to pay off your loan, trading in your car at the dealership might be the easiest option. However, you probably won’t get as much money as you would from a private sale. Dealerships can pay off your loan as part of the vehicle trade-in process and take care of the transfer of title process. Be aware that your trade-in amount could be less than you owe if you are upside down on your loan (i.e. you owe more money on the loan than the car is worth) . If so, you will have to pay the difference between your trade-in value and the amount you owe.

What is a mechanic’s privilege?

In some states, a mechanic can place a lien on your vehicle if you are unable to pay for maintenance or repairs within a certain time frame. Depending on your state, an unpaid mechanic’s lien gives the lien holder the right to sell your car at auction. Paying for your repairs is the only way to prevent you from losing your car if a mechanic’s lien has been placed.

How do you know if a car has a privilege?

If you are buying a used car privately, you should always check its lien status. Here’s how to find out:

  • Perform a full VIN search: Services like iSeeCars free VIN check allow you to enter your vehicle’s identification number or VIN. VIN verification will provide a complete analysis of the vehicle, including title/bond information when provided by the state DMV.
  • Get a vehicle history report: A vehicle history report can provide the privilege history of a vehicle. The iSeeCars VIN verification is also linked to a CARFAX or Autocheck report, sometimes free.


If a vehicle is financed, there will be a lien until it is fully paid off. If you own a financed vehicle, it is important to know who the lien holder is and what the insurance requirements are. If you are selling the vehicle before it is paid for, make sure you know the steps to follow. Always be sure to check if a vehicle has a lien if you are buying from a private seller. If the vehicle has a lien, contact the lender to find out how to complete the car title transfer process.

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