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Selling a car with a lien

One person hands keys to another.
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If you didn’t buy your car in cash, you probably took out a loan and make monthly car payments. When you borrow money to purchase a vehicle, the lender puts a lien on your car that remains in place until the loan is paid in full. This gives the lender a legal claim to the car if you don’t pay the loan as agreed and keeps the title in its name until you’ve paid it off. As long as there is a lien on a car, there are barriers to selling it. But it’s not impossible. 

How to sell a car with a lien 

Selling a car with a lien means you haven’t paid your entire auto loan yet and want to get rid of your car. There are a few ways to go about this. 

Contact your lender 

Before trying to sell a vehicle that has a lien on it, contact the lienholder to obtain the specific payoff amount for the loan. Having this information will help you determine how much you need to sell the car for in order to fully repay the debt. This step is also important because the loan payoff amount may be different than the outstanding balance on your loan statement. 

You’ll also want to ask the lien holder about any other stipulations that may be 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. 

Do your research 

Before listing your car or heading to a dealership, it’s important to know how much you owe on your car. If you’re just a year into your loan, you might have a harder time selling your car compared to someone who’s at the tail end of their loan agreement. 

It’s also a good idea to compare different dealerships and buyers to see which one will offer you the best deal. If you know the value of your car from checking out Kelley Blue Book, this will make negotiations much easier. 

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. 

Sell privately and make more money 

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

When you list your car for sale, mention that it currently has a car lien on it. This lets potential buyers know that there’s still money owed on the vehicle. Potential buyers can pay off the loan so they own the car free and clear, whether through you or the lender. 

Use an escrow account for more security 

An escrow account lets both parties transfer money securely. It also lets you know the buyer is serious about purchasing the car. You can verify the buyer has the money to buy the car, pay off the existing loan and complete the transaction. 

An escrow account is a third-party service — neither you nor the buyer has more leverage with it. The account is simply there to hold the money until the agreement is fulfilled. Keep in mind there’s a fee to use this type of service. You can cover the cost for the extra layer of security by passing on the charge to the buyer or splitting the cost. 

The bottom line 

While the term “lien” usually has a negative connotation, in the case of a car lien it isn’t quite that bad. It simply means you still owe money on your car loan and that your lender can repossess the vehicle if you fail to make payments as agreed. 

But it is still possible to sell your car, even with a lien on it. 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 one 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. 

Learn more:

Private party auto loan: What it is and how to find one

How to get out of an upside-down car loan

How to refinance your car loan, and when to do it

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