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Selling a car with a lien

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When you borrow money to purchase a vehicle, the lender puts a lien on your car that remains in place until you pay the loan in full. The lien gives the lender a legal claim to the car if you don’t pay the loan as agreed. The lender keeps the title until you’ve paid your loan off.

But what if you want to sell your car before you’ve paid it off? Selling a car with a lien can be difficult — but it’s not impossible. Your lender will likely allow it. You will just need to get permission first.

How to sell a car with a lien 

You will need to contact your lender and research your car’s value when you are selling a vehicle with a lien. You may also want to calculate the remaining interest on your loan to ensure you are making a sound financial decision.

Contact your lender 

You will need to get a payoff amount in addition to permission from the lender — the lienholder on your vehicle — to sell.

This information will help you determine how much you need to sell the car for to fully repay the debt. This step is also important because the loan payoff amount may differ from the outstanding balance on your loan statement. There may even be early payoff fees that increase the final cost of your loan.

You’ll also want to ask the lienholder about other stipulations associated with selling the vehicle. These might include the proper steps to transfer the title of the car to a new owner if you’re selling the vehicle to a private owner and not a dealership.

Research your car’s value

Compare dealerships and private buyers to see which will offer you the best deal. Learning your car’s value from sources such as Kelley Blue Book or Edmunds will make negotiations much easier.

You should be able to get quotes from dealerships on what they would pay for your car. Most trade-ins have liens, so it shouldn’t impact your car’s overall value.

You can increase the value of your vehicle before trading it in or selling it. If your current car value is less than the payoff amount, hold off on a sale if you can. Otherwise, you may work through the hassle of selling a car with a lien and still owe money to your lender after.

Sell through a dealership 

One of the easiest and quickest ways to sell your car with a lien is to go to a dealership. This is good for both you and the dealer: You might want to get into a new car, and the dealer makes a sale.  

You might have a hard time, however, if your car loan is upside down, meaning you owe more on the vehicle than the car is currently worth. Because of this, you should explore all of your options before agreeing to a final sale. 

Your options for selling a car with a lien

A dealership will likely be the simplest option when your car still has a lien. However, a private buyer may offer more for your car — although the process will be more complex.

Sell or trade in at a dealership

One of the easiest and quickest ways to sell your car with a lien is to go to a dealership. Dealers know how to work around liens. You won’t need to jump through as many hoops, and the dealer will likely do most of the legwork for you.

This usually results in less money overall — dealers don’t spend as much as a private buyer — but the ease of access could be worth it. Your lender may oppose a private sale but accept selling to a dealership.

You might have a hard time selling if your car loan is upside-down, meaning you owe more on the vehicle than the car is currently worth. Because of this, you should explore all of your options before agreeing to a final sale. Consider holding off on a sale until you can pay off your loan in full or are no longer upside down.

Pay your loan before selling to a private buyer

If selling your car with a lien is too complex, consider paying off your car first. The lender will send you your title, and you can follow your state’s process for title transfers to the new owner. Your buyer can make the purchase free and clear, which is less work for you both.

Unfortunately, you do need the funds to pay off your car in full. Without that, it won’t be an accessible option. But if you want to avoid selling your car with a lien on it, this is one of the simpler methods.

Have a private buyer pay off the loan

Private sales take more work but might net you more money. Many private buyers are open to paying a little bit more to avoid the hassle of going to a dealership.

Your lienholder may disallow private sales or have a specific process, so contacting them ahead of time is crucial. If you are allowed to sell your vehicle privately, your lienholder will instruct you on how to fully pay off the vehicle, whether that’s through you or your buyer.

When you list your car for sale, mention that it currently has a car lien on it.

Consider using an escrow account when working with a private buyer. These third-party services let both parties transfer money securely for a fee.

You can verify the buyer has the money to buy the car, pay off the existing loan and complete the transaction without having to use your own accounts. Even with a fee, the extra layer of security will likely be worth it.

The bottom line 

It is perfectly possible to sell your car while it’s under a lien. There are several ways to do this, including going to a dealership or going through a private buyer.

Do your research ahead of time to determine which will give you the best deal for your car. And if you’re doing a private sale, consider using an escrow account for another layer of protection.

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Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Auto loans editor