Selling a Car with a Lien: A Guide to Legal & Financial Considerations

Selling a car you don't entirely own can be a tricky proposition. Your buyer needs a clean vehicle title, and you can't get a clean title until the lien is removed. Whether or not the lien appears on the title itself or shows up only on a motor vehicle search, you face legal risks if you try to sell the car with an outstanding lien.

Financial Liens

Liens often are placed as the result of a financing arrangement with a bank or credit union. If that's the case, contact the lienholder to determine your payoff amount. You may choose to pay off the lien to get the clear title before completing your sale. If not, or if you still owe enough that you can't write that large of a check, getting a release can be simple if you sell your car to a dealership. Car dealers have the experience and resources to streamline the process. It gets trickier when you're making a private sale. You'll need to go to a branch of the bank or credit union with the lien and perform the transactions simultaneously, or place the buyer's money in escrow until a clean title can be received.

Other Liens

Selling a car with a lien gets more complicated when it's the result of another debt, such as overdue child support or court fees. The party seeking child support then becomes a secured creditor, which means she has a financial interest in the vehicle. A lien that isn't a financial lien may not be shown on the title; instead, states may add them electronically. These liens still must be paid before the title can be transferred.

Order of Priorities

Liens are satisfied based on the order they were filed. If you have an auto loan that you used to buy the car, that lender's interest takes precedence over any other lien. As a result, the secondary lienholder doesn't have a great incentive to seek repossession of the vehicle. It also, however, makes it more difficult to sell, since you'll have to satisfy all liens to complete the sale.

Obtaining the Lien Release

Once the obligation is paid, you'll receive a lien release. Take that lien release to the Department of Motor Vehicles or another authorized agent in your state, and the lien will be removed, which allows you to sell your vehicle. In some states, you may be able to sell the vehicle by providing the original proof that the lien was satisfied. If you don't satisfy a lien before you sell the car, both you and the buyer may face legal action from the creditor.