Title Status and Lien Check

Say you’re buying a car, but you need to take out a loan from a lender to do so. In financing the car, this lender has put significant money into an asset that’s about to drive away.      

A car lien is like an insurance policy for the entity that has lent you the funds needed to purchase your vehicle. Whether a bank, dealership, or private lender, the lienholder wants to have assurance that their money is covered if you default on your loan. Your new car will have a lien on its title until the original loan is completely paid off.

If a car title has a lien on it, that implies that the loan provider is still owed money from the purchase. Therefore, the car does not yet completely belong to you, and a creditor can repossess the vehicle if you default. In this circumstance, the car itself is serving as collateral for the loan.

The lender will typically file with the state department of motor vehicles upon purchase, and will be listed as the lienholder on the car title. 

Because the lender also theoretically co-owns the car with you, they will usually insist that you get full insurance coverage for the vehicle.

Car lien information is crucial when buying or selling a car. Your mileage may vary based on your particular circumstance. For example:

1. You want to buy a used vehicle.

When buying a used car, checking for a car lien on the title is absolutely vital. Why? Well, a lender that owns the lien on a vehicle can legally hold the new owner responsible for the amount owed by the person who initially financed the vehicle. This means that if you buy a used car and don’t check it’s lien status, you may be in for a nasty, expensive surprise if the original financing has not yet been paid off.

Not to mention, correcting a car lien after the vehicle has been purchased is a huge inconvenience. It can take months of stressful and costly negotiating to sort out, especially if the original owner is not cooperative.

Plus, nobody wants to deal with the DMV more than they have to. Sorting out car paperwork and registration can be annoying enough without spending months sending lien release forms, titles, and proof of purchase documentation back and forth.

That said, it’s possible — and sometimes financially savvy — to purchase a used vehicle that still has a lien on the title

2. You want to sell your car and are unsure of its lien status.

If your car had a lien on it when you originally financed it, but you're unsure of its status now, checking the lien status of the title is important before you sell. The smart car owner will check for several reasons:

1. Buyer assurance: An upfront reveal of your car’s lien status, in addition to documented proof, is much more likely to earn a potential buyer’s trust and money.
2. Ensuring your own status: It’s fully possible that your loan was paid off, but the lien removal paperwork never went through. In this unfortunate circumstance, you want to obtain a clear title before you sell.
3. Documenting a known lien: You may know you have a lien on the car, and want to sell anyway. In this circumstance, you want to know the exact details of the remaining loan amount.

Avoid disastrous situations by always checking a vehicle’s lien status before you buy or sell.

Begin by thoroughly reading through any and all documentation you have on the vehicle. Carefully peruse the car’s title, registration, and any other purchase paperwork. It may be clear from these documents that the car has, or had, a lien on the title. In the majority of states, the lienholder will be the one in possession of the official title, so it should be pretty obvious.

If a vehicle lien presents itself, ensure that you have (or are given) paperwork proving that the loan was paid off, and the lien removed. Remember that a paid off loan does not automatically mean that the lien has been officially removed.

Even if this documentation is clear, you should always find the vehicle identification number (VIN) inside the actual car, and compare it to the registration and title. Make sure the seller’s name and ID match the paperwork as well. With the VIN, you should be able to check lien status on your state’s DMV website.

Lastly, it’s smart to run a thorough VIN check. We cannot stress this point enough. A comprehensive VIN history report will answer the following urgent questions:

• Does the vehicle have a lien on the title?
• Is the car stolen or salvaged?
• Has the car been in any serious accidents that may compromise its safety?

VINsmart’s vehicle history information checks outshine our competitors due to our professional partnership with the National Motor Vehicle Titling Information System (NMVTIS), National Highway Traffic Safety Administration (NHTSA) and National Vehicle Service (NVS).

We partner with these organizations to provide you with the most up-to-date documentation on the status of your vehicle, and guarantees the discovery of any publicly available vehicle lien information thats updated in the DMV system.

VINsmart vehicle history reports include this valuable car lien lease information by identifying most lienholders on record. This same check will also identify any vehicles currently owned by leasing companies.

In addition, NVS’s car lien/lease check will alert you if the vehicle has been impounded, which could result in some additional fees or fines if not addressed quickly. We also check eBay to see any past vehicle sale listings.

Run a VIN Check

If you want to buy a car that still has a lien on it, you must understand that the lienholder must be paid off first. It’s as if the vehicle is co-owned by the owner and the lienholder, and therefore that remaining debt must be paid off before ownership is transferred.

This third party financial interest can be complicated, but not impossible. So… should you buy a car with a lien on it? It can be financially savvy for a buyer who is willing to deal with additional hurdles — if someone is desperate to get out of debt, you may get a lower price on the liened vehicle.

Begin by ensuring you know exactly how much money is still owed, and to whom. A DMV and VIN check is fundamental. You must get the lien officially discharged as soon as possible, and there are a few possible ways to go about this.

The first way is to go directly to the lienholder with the seller. With all three of you in the room, you can pay off the lender directly, then give the remaining money to the seller. Make sure there is a signed agreement before you exchange any money.

Another option is to use an escrow service. Escrow will protect everyone involved, oversee loan payments, and smooth the paperwork to ensure the quickest possible title transfer. The only downside to this option is that a typical escrow service will charge a small percentage fee.

Or, the seller can refinance the balance of the lien loan into a personal loan, thereby removing the lien from the vehicle title. When the vehicle itself is no longer serving as collateral, it will be free to purchase.

The last, and most precarious option, is that you take the lien payments over yourself, while the vehicle is still registered to the original owner. This is the least stable situation, since the vehicle will not officially belong to you until the lien is paid off. But if both parties trust one another, this is an option that minimizes waiting time and paperwork.

Not technically. You can sell a car that still has a lien on the title, but be aware that you will not receive any money until the lienholder has been paid in full for the remaining loan amount.

As mentioned in the previous section, car ownership cannot be officially transferred until the lien is removed from the title. Scroll back up for an in-depth discussion of your selling options.

If you know that you want to sell your vehicle within the next six months or so, and you also know that you still have a lien on the title, there are a couple other options as well.

The first is to pay off the remaining balance on your financing ahead of schedule. This may require a lump sum of money that is not available to you, and therefore may not be a viable option. On the other hand, paying off your loan early may save you money on interest. Once the loan is paid off, your lender should release the lien, and you’ll be ready to transfer the title to a potential buyer, free and clear.

Instead of selling privately, you may also choose to trade in your car at a dealership. There are distinct benefits to a trade-in, as the dealership will usually sort out the paperwork of paying off the original loan and removing the lien themselves.

When all original financing is paid off, the lienholder should send a lien release document to your state’s DMV. The DMV will update the title, remove the lienholder, and send it to you. If you can, ask for a copy of the lien release document from the lender as well.

Though this process may seem straightforward, it’s smart to call the lender once you think your loan is fully paid up and make sure everything is proceeding. Once the DMV receives the lien release form, they should process it in about 10 days, and you will get your title in the mail within 2-4 weeks.

First off, in order to have mistakenly purchased a car with a lien on the title, you most likely never received the proper paperwork. It isn’t possible to transfer ownership without a lien release and a clear title, so if you bought a car privately and later found out it was still under financing, you probably do not have the correct documents, or any official proof of ownership.

You have a couple options in this case: pay off the original loan, or sue the seller. Neither is ideal.

Unfortunately, since the lienholder has a stronger legal claim to the vehicle than you, they have priority over your unregistered interest and are well within their rights to repossess the car. Legal action against the seller may get you your money back in small claims court, or may just be a huge and expensive headache.

The only way to prevent such an immensely unpleasant situation is to thoroughly check a vehicle’s title lien information before you purchase, and make sure you get all the correct paperwork.

Car lien lease information is a critical portion of the VINsmart vehicle history report and an important factor to consider before buying a used car.