How to sell a car with a lien

Quick insights

Selling a car is usually straightforward. You either find a private buyer who is willing to pay you a fair price, sell your car to a dealership as a trade-in, or sell it outright to a dealership or car-buying service. But when your car has a lien on it, it can be important to understand what it means for your sale. 

Below are steps you can follow to sell a car with a lien.

What to know about selling a car with a lien

First, let’s go over what a lien is and what it could mean for your car sale.

When you take out financing to buy a car, you’re provided with a loan from a financial institution or another type of lender. When you do this, you’re also granting that lender a lien on the vehicle, making them the lienholder.

A lien is a legal claim on something of value. In most cases, the lienholder is the lender that gave you the car loan. This is how the vehicle itself is used as collateral for your car loan.

The lien is only released when you pay off your loan completely as per the terms of your contract, which includes payment of interest. Usually, the lienholder can send a message to your state’s motor vehicle department informing them that the lien has been released when you pay off your loan. When that happens, the lender no longer has a right to repossess your vehicle and you can do with it as you please.

Steps to selling your vehicle with a lien

You can still sell your vehicle if it has a lien on it. But depending on how you intend to sell it, doing so could be straightforward or could require you to do some paperwork.

Here are the steps you can take when selling a car with a lien.

1. Check to see if there are liens on your vehicle

If you’re making payments on a car loan, you most likely have a lien on your vehicle. In rare circumstances, a vehicle may have a lien on it that you weren’t aware of when you purchased it. This can sometimes occur in private transactions that aren’t as thorough as they need to be.

Before you sell your vehicle, go to your state’s Department of Motor Vehicles (DMV) website. Most DMV websites have a title checking feature that lets you pull up vehicle information. Enter your vehicle identification number (VIN) into the feature, and you should be able to see if there is a lien on your car.

Alternatively, you can call or go to the DMV to do check for liens.

2. Determine how much you need to pay off your loan

Once you’ve determined that you have a lien, you can contact the lienholder to determine how much you have left to pay on your loan. In most cases, the lienholder is the lender that gave you the car loan. With this information, you can determine how much money you need to make in your sale to cover your loan.

3. Find out the estimated value of your car

Before you decide how you want to sell your car, it can be helpful to know how much it’s worth. There are several online resources available that will provide you with the estimated value of your vehicle.

4. Sell your vehicle to a dealership or a private party

Most people sell their car to either a dealership or a private party. Selling to a dealership can be more straightforward, but you may wish to sell to a private buyer if you think you can get a better price, or if you know someone who has their heart set on your car.

Selling to a dealership

If you intend to sell your car to a dealership, they can help you with the paperwork regarding the lien and the transfer of the car’s title. 

If you owe more than the dealer is willing to pay for the car (negative equity), the dealer may add the difference to your new loan if you’re trading in your car with that dealer. If you have money left over from the sale after covering the remaining cost of your loan, you could also put that money toward a new vehicle.

Selling to a private buyer

If you intend to sell your car to a private party and not a dealer, you are required to pay off the remainder of your loan before doing so. Once paid off, the lienholder will release the lien with your state’s transportation agency. This can make the sales process simpler as there are no other legal claims to your vehicle. 

In summary

It is generally easier to sell a vehicle without a lien, but it’s still possible to sell a car with a lien against it. If you plan to sell a car with a lien, it can be helpful to contact your lender and get an idea of how much of your loan you still need to pay off. Common options for selling a vehicle with a lien include selling to a dealership and selling privately.