A lien on your car means that you still owe the bank or finance company money and don't have full ownership. The sales price you accept for your car needs to cover any liens on the vehicle, or you'll have to have a plan for coughing up the difference before the car sells. The amount of the lien also has a direct effect on how much money you will actually put in your pocket from the sale. As long as your car is worth what you owe, or better yet, more than you owe, the sale will pay off the lien.
Having a lien on your vehicle is normal. When you finance a new or used vehicle, the bank that provides the loan to you secures the debt by placing its name on the car's title as a lienholder. This helps buyers secure car loans since the banks hold onto the car as collateral until the car is paid in full. When you no longer owe money on your car, the bank will no longer have a lien on your vehicle.
Obtaining a Payoff Amount for the Lien
Contact your lienholder, the bank that finances your car, and ask them for a payoff amount. Your bank will generally give you a five- or 10-day payoff amount. If you sell your car after the quoted payoff date, you will need to obtain a new payoff amount before finalizing the sale. The payoff amount will be the amount the bank must receive in order to release its lien on the car.
Selling the Car
When you sell your car with a lien, the other party will want to know that the lien will be resolved when they pay you. While you're excited to sell the car, and release ownership, the new owner needs to be confident that he'll be able to take ownership. If you can afford to pay the lien off using your savings before you sell the car, the transfer of ownership will be simplified. If not, you will need to advise your buyer of the lien and the lien amount. Contact your Department of Motor Vehicles or lender to find out how titles are handled in your state. Dealerships will normally handle all the paperwork, including obtaining the lien release and title transfer, if you sell or trade in your car with them. You probably will get less for your car than in a private sale, however.
Getting a Lien Release
When banks receive payment for the full amount owed on the vehicle, they will release their lien from the title. This is called a lien release and is given to you when you pay the loan off. If you have the title, you can give it to the seller when he pays. If you do not possess the title and your lender is local, call your lender to arrange a meeting between you, the buyer and the lender so that the lien can be paid off and the title securely signed over to the buyer. If your lender is not local, you can arrange the sale using an escrow service that will hold the money until the title is released to the buyer.
Sara Mahuron specializes in adult/higher education, parenting, budget travel and personal finance. She earned an M.S. in adult/organizational learning and leadership, as well as an Ed.S. in educational leadership, both from the University of Idaho. Mahuron also holds a B.S. in psychology and a B.A. in international studies-business and economics.