A lien on a car is a legal claim against a vehicle by a creditor or lien holder. It gives them an interest in the vehicle until an outstanding debt is paid. It’s most commonly a safety net for financial institutions that provide loans for vehicle purchases.
An outstanding lien creates headaches for both parties if not addressed before the transaction is completed. Whether you’re buying or selling a vehicle, understanding liens prevents unexpected complications. Learn what a car lien is, how to check for liens before buying, and how to remove a lien. Then, we’ll introduce you to DealNow, a payment tool that makes transacting a vehicle with a lien as simple as a car with a clean title.
Car liens are created under different circumstances. Understanding the type of lien on a vehicle helps you properly address it.
A financing lien is created when someone uses an auto loan to purchase a vehicle. The lender (bank, credit union, or financial institution) becomes the lien holder and holds a legal interest in the car until after the final loan payment. The lien is recorded on the vehicle title as a security for the loan agreement. Loan terms determine how long the lien remains in effect.
Financing liens are the most common type. Keep reading to learn how DealNow makes it easy to transact a vehicle with an outstanding financing lien.
When someone doesn’t pay for repairs or maintenance, auto repair shops can place a lien on their vehicle. This gives them the right to hold the car or force a sale to recover costs. These liens may be filed with the Department of Motor Vehicles and are also known as artisan’s or service provider liens.
Government agencies can place liens for unpaid taxes. These may come from federal, state, or local tax authorities and often take priority over other liens. They require full tax payment and can lead to vehicle seizure if unresolved.
Judgment liens result from court orders. They’re created when someone wins a lawsuit against someone, and the court grants the plaintiff a claim against their property. These can be attached to vehicles and require settling the judgment amount for removal.
In many states, child support liens may be placed on vehicles for unpaid support. Family support agencies file these through legal proceedings. These liens require support payment before they are removed.
Consensual liens (like auto loans) are those a person voluntarily agrees to, while involuntary liens (like tax or judgment liens) are imposed without consent. Both appear on the vehicle title and complicate car transactions.
Buyers should verify a car’s lien status before completing the transaction. A car with active liens creates legal and financial problems after purchase. Here’s how you can check a vehicle’s lien status.
A vehicle history report is the quickest way to discover potential liens. AutoCheck, Carfax, the National Motor Vehicle Title Information System, and other services compile data using the vehicle identification number (VIN). These reports typically show:
For a modest fee, you’ll uncover the vehicle’s financial status along with its maintenance and accident history.
DealNow makes it quick and easy for buyers to order a vehicle history report from within the app.
The Department of Motor Vehicles (DMV) maintains vehicle records including lien information. Contact your local DMV or state transportation agency to request a lien search on a vehicle you’re considering:
DMV records are the most authoritative source for lien information since they show all current and previous liens attached to the title.
The title document displays current lien information. On a clean title with no liens, the owner is listed as the sole party with interest in the vehicle. If a lien exists:
If the seller claims a lien was recently paid off, ask for the lien release document as proof.
If you know the previous or current lien holder, you can contact them directly:
Most lenders have dedicated customer service centers to handle these inquiries.
For certain types of liens, especially mechanic’s liens and judgment liens:
This search may uncover liens that might not appear in standard vehicle history reports.
Many online services offer lien searches, often with more detailed lien information than basic history reports. These services usually charge a fee but can save buyers from purchasing a car with a hidden lien.
DealNow includes an optional title check that can verify the clear title status before you complete a transaction.
Liens affect car buyers and sellers. Save yourself a headache and learn how liens apply to you.
When a vehicle has an outstanding lien, the seller doesn’t possess a clean title to transfer to the buyer. The financial institution or other lien holder has a legal right to the vehicle until the debt is satisfied. The seller can’t legally complete the sale without addressing the lien. Any attempt to sell a vehicle without disclosing liens could be considered fraud and may result in legal consequences.
Purchasing a car with an undisclosed lien puts buyers in a bad place. Even if the buyer paid the full price to the seller, the lien holder maintains the right to repossess the vehicle if the original debt remains unpaid. This means a buyer could lose their money and the car. Additionally, buyers may face difficulties registering the vehicle or obtaining insurance coverage without a clear title in their name.
Even when both parties act in good faith, liens complicate the title transfer process. The process requires coordination between the seller, buyer, and lien holder, often necessitating:
These extra steps used to kill car transactions with liens. Keep reading to learn why that’s not the case anymore.
If a seller owes $8,000 on a car worth $12,000, they’ll need to receive at least enough money to pay off the lien. The outstanding balance must be factored into negotiations, with a clear understanding of:
Lien regulations vary by state. Some states have streamlined electronic systems for lien verification and release, while others rely on paper documentation that takes longer to process.
The authority in each state sets requirements for:
Fortunately, a lien doesn’t kill car transactions, it just needs to be dealt with first.
The vehicle owner is responsible for removing liens. Whether they’re paying off an auto loan or addressing another issue, the process follows this general path:
Lien removal takes 5–30 business days from payment to receiving your new title. Some lenders participate in electronic lien release programs that expedite the process, while others rely on mail and paper documentation which takes longer.
Making your final payment doesn’t automatically remove the lien—you must get documentation and update your title. A skipped step could leave the lien active on your vehicle records, complicating a later sale or registration.
It is legal to buy or sell a vehicle with a lien, but until now, it hasn’t been easy. The sale requires a lot more time and coordination, and buyers risk getting involved in a situation they don’t understand or getting scammed.
Here’s what the process used to look like:
Each step is a speed bump that might kill the deal or end in a legal dispute. Fortunately, we’ve created a solution to auto transactions involving liens that makes the process super simple.
We designed DealNow to streamline private-party auto transactions—even those involving liens. Our high-tech approach lets both parties finish the deal in an hour or so, anytime, anywhere, from the convenience of their mobile device. Here’s how:
What traditionally required multiple trips to banks, uncertain waiting, and significant trust between strangers now happens on one platform in an hour or so.
Ready to sell or buy a car with an existing lien? Try DealNow and enjoy complex vehicle transactions made easy.
Imagine you financed a Honda through a bank. The financial institution places a financing lien on your vehicle title, appearing as “Lienholder: First National Bank” on the title document. This gives the bank a legal claim to your car until you complete all your monthly payments over the loan term. If you fail to make payments, the bank can repossess the vehicle as it’s legally considered the legal owner until the loan balance is fully paid off and a lien release document is issued.
The most common lien on cars is a financing lien, which is created when someone gets an auto loan to purchase a vehicle. These consensual liens are held by auto lenders, like banks, credit unions, or financing companies.
The lender becomes a lien holder on the title document and maintains a legal claim to the vehicle until all loan terms are completed. This security arrangement appears on the vehicle’s title and in electronic records until the lender issues a lien release once the outstanding balance is fully paid.
You can often get a personal loan if your car has an existing lien, but with some limitations. When applying, lenders will consider the outstanding balance on your current auto loan along with your other debts. Your car’s equity (value minus loan balance) affects how much you can borrow.
Some financial institutions offer title loans on vehicles with existing liens, but these typically require significant vehicle equity. Such arrangements often come with high interest rates and put you at risk of losing your vehicle if you default on either loan.
After receiving your lien release document, the timeline for updating official vehicle records varies by state. Most motor agencies process lien releases within 5–10 business days, but it can take up to 30 days. States with electronic lien programs typically update records faster than those relying on paper documentation. For immediate verification, keep your proof of payment and lien release letter on hand. Some states offer expedited services for an additional fee if you need urgent confirmation of your clean title status.
A title and a lien are different aspects of vehicle ownership. The title document is the official certificate of ownership that identifies the legal owner of the vehicle and includes the vehicle identification number, make, model, and year. A lien, on the other hand, is a legal claim against the vehicle by a creditor who has a financial interest in it. The lien is noted on the title document and gives the lien holder certain rights over the vehicle until an outstanding debt is paid.
If you discover a previous owner’s lien after purchasing a vehicle, you’ve encountered a serious problem. Since the lien holder maintains a legal claim to the vehicle, they could potentially repossess it—even from you as the new owner. Your first step should be to contact the seller immediately and request they satisfy the outstanding debt and provide a lien release document. If they refuse, you may need to consult with an attorney about your options.
Always conduct a thorough lien search and get a vehicle history report before completing a vehicle purchase.
Vehicles with liens typically require better insurance coverage. Most lien holders require full comprehensive coverage and collision insurance with specified deductibles while their lien is active. Your insurance policy must list the lienholder as an additional insured party or loss payee so they’re protected if the vehicle is damaged.
Some lenders also require gap insurance which covers the difference between what you owe and the car’s value if it’s totaled. Your insurance company will send proof of appropriate coverage directly to your lien holder, and they’ll be notified if your policy lapses.
Transferring an auto loan to another person is difficult, and most loan agreements don’t allow it. Instead, the new buyer typically needs to secure their own financing to pay off your existing loan. Some credit unions and financial institutions may permit loan assumptions, but this requires the new borrower to go through a full credit approval process and formally take over monthly payments. Another option is refinancing, where the new owner obtains a new loan in their name. This process requires releasing your current lien and establishing a new one, with a new title document showing the new lien holder and vehicle owner.
A lien sale occurs when a lien holder sells a vehicle to recover an outstanding debt. This typically happens after repossession due to loan defaults or when repair shops or storage facilities haven’t been paid. The process is regulated by state lien sale laws and managed by a Lien Sale Unit within the Department of Motor Vehicles. Before selling, the lienholder must provide notice to the registered owner and other interested parties. After the sale, proceeds first satisfy the lien amount, with any surplus returned to the original owner. These sales typically happen through public auctions and result in a new title being issued to the buyer with previous liens removed.
DealNow is the easiest way to close your own vehicle deal, anytime. It’s the safe and simple way to avoid fraud, sign documents, and instantly transact, all in one app.
