After hours spent searching and comparing vehicles, you finally found the one that's going to fit your needs. It's got the right mileage, style and size. There's just one small problem: the private seller has a lien on the title. If this nightmare situation sounds all too familiar, don't worry too much. There are several steps you can take to make it a dream come true.
Check for a Lien
Before you buy any car from a private seller, it's essential to find out for sure if the vehicle has a lien or not. The seller may fail to disclose this information because they don't understand the process, so be sure to check for yourself. Sellers can carry liens on their cars for a few reasons. It could just be that he hasn't yet paid off the loan he took to buy the car in the first place, or the vehicle may have a lien because the owner has not yet paid for repairs he made on it. Furthermore, claims can come from loans in which the borrower used the car as collateral.
One way to check is to see the car's Vehicle Identification Number (VIN), which is usually found on the dashboard or inside the driver-side door. It should be 17 digits in length and have both letters and numbers. If there is no VIN on the vehicle, don't buy it; that could be a sign that it was stolen. Once you have the VIN, you can head to your state's Department of Motor Vehicles website and search the number. This should allow you to see if the car has a lien.
Option One: The Seller Pays the Loan
If there is a lien on the car, you may ask the seller to pay off the loan before you buy the car. As soon as the seller pays the claim, he should contact the lender and get the title transferred to his name as quickly as possible. This action moves ownership from the bank or other entity that technically own the car to the seller. Then, the seller is entirely within his rights to sell the car to you.
Alternatively, if the seller does not have the cash on hand to pay off the debt, he may be able to refinance. This way, he can take out a personal loan or line of credit, pay off the lien with that, and then make payments on the new loan. If the seller tries to make money from selling the car to you without first paying the lien holder, it could cause legal trouble for all involved.
Option Two: You Pay the Lien Holder
Sometimes a seller is trying to get rid of the car to pay off the debt he owes on it. If this is the case, you may be able to pay cash to the lender, rather than to the seller directly. If you're buying the car with a loan, you will need to work with both your lender and the lien holder to come to an agreement. Once you pay the lien with either cash or your loan, the lien holder can transfer the title to you or your lender. If you take this route, be sure to have a written and signed agreement in place before you pay the lien.
Option Three: You Take On the Payments
If neither you nor the seller has the cash to pay off the lien, you can choose to take on the payments that the seller owes. For this option, you will need to enlist an escrow service. The escrow account manager will take payments from you and transfer the title to you when the lien is paid off. This route can be easier because escrow services are equipped to handle these situations and do so regularly.
- Do not buy a vehicle without first inspecting it. If you are not capable of performing an inspection on your own, ask a mechanic to inspect the vehicle for signs of crashes or any other significant problems.
Mackenzie Maxwell believes that a well-made budget is a key to a happy household. She starting combining this interest with her passion for writing in 2016. Mackenzie has written for financial sites like The Balance and local financing organizations.