Buying a used car can be a tricky proposition. It requires a diligent search, test drives, and plenty of legwork to find the right car. One step that should never be overlooked is the search for any liens on the title. If you make a mistake and the vehicle has a lien on it, you may wake up to find your new car repossessed with very little that you can do about it.
The difference between a car registration and a car title is that the title relates to the ownership of the car, informs the state who actually owns the vehicle, and lists any liens on the vehicle.
The registration, on the other hand, relates to the license plates on the car. License plates provide revenue to the state and are usually paid to the state DMV. A title will not typically contain information regarding the registration or the license plate and should be kept in a safe place at all times. A registration, on the other hand, should be kept in the vehicle.
A car lien is the right that a loan company, bank or other party has to the vehicle in exchange for their assistance in paying for the vehicle. A good example of a lien is a car loan. In exchange for the money to buy the vehicle, the bank puts a lien on the vehicle, which acts as “security” for the bank that you will repay the loan. If you fail to repay the loan, the bank has a legal right to the vehicle, which they will repossess and sell to satisfy your debt.
Liens can be applied to a vehicle by institutions other than banks or finance companies. If vehicle taxes or fees are not paid, the local government may put a lien on the vehicle. Unfortunately, liens can pass to a new owner if the car is sold, so before buying a used vehicle it is important to verify there are no outstanding liens against it.
Here is a detailed description of how to make sure a vehicle is not carrying any liens.
Part 1 of 3: Examine the title
Step 1: Examine the paperwork. The first thing to do is to have a detailed look at all of the paperwork related to the vehicle, especially the title and registration.
While the details listed on a title vary by state, it should contain information related to the current owner, past owners, and any current or past liens on the vehicle.
- Tip: If you are buying the vehicle from a private seller, ask to see their ID to verify they are truly the person listed on the title as the owner.
Step 2: Acquire additional paperwork. Request additional paperwork if necessary. If the title shows there has ever been a lien on the vehicle, ask the seller to produce proof that the lien has been satisfied.
The seller should have a copy of the lien release, which is a legal document showing that the lien has been satisfied. A lien release can be notated on the title or as a separate document, which varies by state.
- Warning: If you do decide to buy a car that has had a lien against it, be sure that you have possession of all lien release documents when the sale is complete as you will need them when you eventually sell the vehicle.
Step 3: Match the VIN number. Get the VIN number from the car and make sure it matches all the documents attached to the car, including the registration, title and any lien release documents.
The VIN number can be found on a small metal plate on the dashboard of the vehicle on the driver’s side. It is a 17-digit number that contains both numbers and letters. If the VIN plate is missing, the number is incomplete, or the number doesn’t match the one on the vehicle documentation, do not buy the car.
Warning: The seller of any vehicle should have all of these documents collected and ready for you to view. If they do not have a copy of the title, current registration or lien release document, do not go forward with the sale until they can produce all of these documents. If they seem reluctant to provide them, there is a good chance they do not have clear title to the car and you should move on to another vehicle.
Part 2 of 3: Do a VIN check
Once you have the VIN number there are a number of sources that allow you check the VIN online which will alert you to any liens on the vehicle as well as give you a history of that car, for example if it has ever been in an accident. It is recommended that you pull a vehicle history on any car you are seriously considering.
Step 1: Acquire the VIN number. Pull the VIN number from your car. This will allow you to do an online check for liens and a general history of the vehicle.
Step 2: Use a title checker feature. Go to your state DMV site and see if they have a title checker feature.
It varies by state but most have this feature. It allows you to put in the VIN number of any vehicles you are considering and it will pull up the title information on record. You should be able to determine if the car has a lien against it.
If the title shows as clear, you are good to go on the purchase; if it shows a lien against the vehicle, you will need to go back to the seller and request additional information.
Step 2: Use a title check feature. Go to your state DMV site and see if they have a feature that checks titles.
It allows you to input the VIN number of any vehicles you are considering and displays the title and lien information. You may need to visit your local DMV office if your state does not offer online access.
If the title shows as clear, you are good to go on the purchase; however, if it shows a lien against the vehicle, you will need to go back to the seller and request additional information.There are few things to keep in mind:
Mistakes or delays do happen with the DMV. If the seller claims they have paid the lien but the title still shows a lien on the vehicle, it is possible that the DMV has not been properly notified of the lien payment.
The seller should be able to correct this problem by going to the DMV office with proof of their lien release. It is possible there will be a fee for this, which the seller should pay.
If the seller has lost the lien release, they will need to go back to the bank or financial institution to get a copy of it to bring to the DMV.
Step 2: Pull a vehicle report. Use a site such as CarFax, AutoCheck or CarProof to pull a vehicle report.
While this option is not free, it will not only put your lien concerns to rest, it can also alert you to recalls associated with the vehicle as well as if the car has ever been in an accident.
- Note: Fees vary by site.
Step 3: Visit the DMV. If your local DMV does not provide online access to titles, it is possible to visit their local office and request a title report.
This report will provide lien information and in most cases will alert you to any accidents the car has been involved in. There is usually a small fee but it varies by state.
Mistakes or delays do happen with the DMV. If the seller claims they have paid the lien but the title still shows a lien on the vehicle, it is possible that the DMV has not been properly notified of the lien payment.
The seller should be able to correct this problem by going to the DMV office with proof of their lien release to get the title corrected. It is possible there will be a fee for this, which the seller should have to pay.
It is also possible that the seller has lost the lien release payment. If that is the case, they will need to go back to the bank or financial institution to get a copy of it to bring to the DMV.
- Warning: Do not complete the purchase of a vehicle until you have a free and clear title to the vehicle. Even if the seller has proof via a lien release, until the DMV notates that on the title, you will not own the car free and clear. The hassle and fees of contacting the DMV to correct any errors on the title will fall to you.
Part 3 of 3: Get a lien released
Regardless of how you search for liens, if one pops up it will have to be dealt with before you purchase the vehicle. Never purchase a vehicle with active liens against it. All liens should be satisfied prior to completing the purchase.
If you are the seller of a vehicle with a lien or you have purchased a vehicle that you later discovered had a lien against it, getting the lien dropped is important.
Step 1: Resolve the lien. If there is a legitimate lien against the vehicle, the only way to remove it is to pay the lien.
If you are the seller of the car, contact the lienholder, get a correct payoff amount, and pay off the lien. The lienholder should release the lien, and send a copy of the lien release to you and the DMV, which should be notated on the title of the car, giving you free and clear ownership of it.
If you have purchased a vehicle that has a lien against it, contact the seller and ask them to resolve the issue. If they refuse, your only option may be paying it yourself.
Warning: Failing to satisfy the lien could result in your vehicle being repossessed by the lien holder, which is within their legal rights.
Warning: Depending on the method of payment there can be a waiting period for the lien to be released. If payment were done by check, the financial institution would typically wait until the check has cleared. This can take up to 2 weeks depending on the circumstances.
Step 2: Visit the DMV. Go to the DMV office to show proof of the lien being released.
The DMV should remove the lien for the title and transfer it into your name if you are the buyer of the vehicle.
- Note: In most states there will be a charge for this service.
Verifying that a used vehicle is lien-free before completing a sale is one of the most important steps in the car buying process. It will prevent the serious inconvenience of having the car repossessed and will give you the peace of mind knowing that the car is fully yours. Once you have established that the title is clean, don’t forget to have the rest of the vehicle checked out. One of YourMechanic’s mobile mechanics would be happy to come to your home or business to performa pre-purchase inspection to make sure the car is in good working order.
