The Process to Sell Your Own Vehicle With a Lien

If you want to sell your vehicle with a lien on it, you must work with your buyer and your lender to do so. Working with both allows you to receive the lien release necessary to transfer ownership in most states while you keep the buyer apprised of the time frame of the transfer.

Significance of the Lien Release

You must pay off your loan to obtain a lien release, and in some states, the lender holds the title until the loan is paid. Your title lists your lender as the lien holder, which is shown on the front of the title. Before selling your car, call your bank to discuss your payoff amount, which is the amount you'll usually have to pay before you can transfer ownership. The lien release is an official bank document that states the release of interest in the vehicle. You can sell your car for more and keep the profit, but if your payoff is less than you can sell your car for, you'll have to come up with the difference. Most states do not allow you to transfer vehicle ownership while a lien is present.

Time Frame

After you find out your payoff amount, ask about the time frame to obtain a lien release from your bank after payment is made. This way, you can better inform your buyer of the process and time frame to completely transfer ownership. Find out the quickest way to obtain the release and if you can arrange for the buyer to make payment if the bank is not local. If your state holds titles (some give the title to the lien holder instead of the borrower), find out how long you can expect to wait before getting it. This information should be relayed to the buyer once you have it.

Buyers

Deal with buyers just as you would if you had no lien on your vehicle. Once you have an interested buyer, let her know that you have a loan on your vehicle that you intend to pay off with the sale amount. This is not entirely uncommon, but the buyer should know he cannot purchase the vehicle that day and title it the next. Depending on the cost of your vehicle, you may find that the buyer has to complete loan paperwork to purchase your vehicle, which will take some time itself. If your buyer finances through your lender, the bank can take care of the payoff and titling with the buyer.

Payment

Pay the loan off physically at the bank, if possible. If the lender is local, you and your buyer should arrive to the bank together to pay off the loan. Doing so ensures buyer's peace of mind, as he'll know that the sale money is going towards the pay off and he can obtain the lien release and title that day, in most cases. If your lender is not local, arrange for payment to be made to the bank by the buyer, not by you. Ask your lender how to arrange for payment to be made by another party. If you owe money on top of the sale price, pay it before the buyer makes his payment and allow your bank to confirm that the loan has been satisfied (the bank can put a note in the system to discuss information with a named party).

Considerations

In some states, you can transfer ownership of a vehicle while a lien holder is listed on the title. However, most knowledgeable buyers prefer to have a lien release before titling, as the vehicle can be repossessed for your non-payment. In such states, you can sign the title over to the buyer so the vehicle can be titled and registered quickly. You can mail the lien release to the buyer as soon as you receive it. Call your state motor vehicle office to ask if you can transfer ownership with a lien holder listed on the title so you are prepared to give your buyer the option.