An outstanding lien on a vehicle means that the vehicle serves as collateral for an unsatisfied debt. The lender who financed your car probably obtained a lien against your vehicle -- filing the lien with the New York Department of Motor Vehicles until you satisfy the debt. If you default on the lien, your lender may repossess the vehicle. Selling the vehicle does not remove a lien against it, unless you use the money from the transaction to fulfill the loan.
Title Transfer
Lien-holders in many U.S. states keep the title certificate on a vehicle until the buyer pays the loan in full. New York, however, does not have such provisions and allows the purchaser of a vehicle to possess the title certificate, though the certificate will list any outstanding liens against it. If you sell your car in New York before you finish paying for it, you may transfer the title to the new owner while the lien is still intact.
Removing the Title Lien
Once the buyer purchases your vehicle, you must sign over the title to the new buyer, which he will use to register the vehicle in his name. Though you may have satisfied your loan terms and officially removed the lien from the vehicle, the title in your possession prior to satisfying the lien will still list the original lien against the car. The new buyer may attach the original lender's proof of lien release to the title, or may wish to acquire a fresh title free of the previous lien.
The latter requires that the new owner apply for a release of lien by sending the existing title and lender's proof of lien fulfillment to the Commissioner of Motor Vehicles at the New York Department of Motor Vehicles Title Services department in Albany, New York. There is a $20 fee for title lien removal payable by check or money order.
Financing
According to a Kelley Blue Book consumer study in 2010, 58 percent of used car buyers finance at least a portion of their car purchase. If you wish to sell your vehicle with the lien still on it, look for buyers prepared to pay in full through cash or bank-financing. Seller-financing is difficult if your car has a lien against it. Buyers may not be inclined to make car payments to you in confidence that you will use the money to satisfy the loan. Though a buyer may agree to a title transfer while you still owe money on the vehicle, a default on your part may cause the lender to repossess the vehicle, leaving the new owner without a car.
Considerations
An Automotive News report says that approximately 30 percent of car owners looking to purchase another car are upside down on their existing loans -- meaning they owe more for the car than it's worth. If you currently owe more money on your vehicle than you will be able to sell it for, you may have to wait until the loan value catches up to the retail value before conducting a private party sale. If you must free yourself of the car, consider trading it in for another vehicle from a licensed automotive dealer. Dealers don't mind accepting trade-ins for vehicles with outstanding liens and your lender can roll over your unpaid loan debt into your new loan when you finance your new car.
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