Why Do I Need a Lien Release to Sell a Car?

If you have a lien listed on the title to your automobile, then you do not fully own your vehicle; a bank is listed as a lien holder when it has partial ownership. Even if you paid off the loan, you must prove it by providing the lien release. If you cannot provide the release, your potential buyer faces risks for any money you owe on the vehicle.

Lien Reporting

Your title lists a bank as a lien holder on it. This means that a bank has financial interest in the vehicle and that you do not fully own it, unless you can provide a lien release that clears the title. The lien release officially proves that the debt is satisfied and allows transfer of ownership to the buyer. In the event you sell your vehicle, providing the original lien release allows the new owner to title the car in his name without the lien holder present, as it is on your current title. Some states allow title transfers when a lien exists and some do not.

Lien Release

A lien release is an official letter from the titled lender that states the vehicle loan is paid in full. It is printed on bank letterhead and is signed by a bank representative. Also, the titled borrower's name and address is listed on the letter, as well as all vehicle information. This includes the car's year, make, model and the vehicle identification number (also known as the VIN). You must provide the original letter with a signed title to transfer ownership.

Personal Liability

In states that do allow title transfers when a lien exits, purchasers usually will not purchase the car if the title is not clear. If you still owe money on the vehicle, it can be repossessed from the new owner. If you leased the car before buying it, the lien can signify that you never paid your taxes on the purchased car. To avoid liability for your debts, the buyer will likely request a lien release, even if your state does not require it.

Handling Lien Releases in the Future

Because your bank will send you a lien release once your loan is paid off, you can apply for a new title. If you bring your lien release and your current title to a motor vehicle office, you can have a new title issued in your name alone. Or, you can put the lien release in a safe place to include with your title for when you are ready to sell. Obtaining a new title eliminates the need to keep the lien release. If you are ready to sell your car and cannot locate the release, obtain a new one from the bank that is listed as the lien holder.

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Comparison of Zero Percent & Cash Back in Auto Loans

Car buyers can be faced with improbable advertisements and enticing deals every day of the week. Though only a small portion of the population is in the hunt for a new car at any given time, terms such as "zero percent financing" and "cash back allowances" seep into the general consciousness, and consumers look for those deals when they go car shopping. The question is which of these terms--if either--really means anything to the average shopper.

Zero Percent Financing

Almost every loan comes with interest. Interest is the bank's way of making money from lending people funds. It means that customers are going to be paying more than the cost of the item (in this case, a car), as they'll be paying back interest in addition to the principal. Zero percent financing simply means the finance company has agreed to give out car loans without charging a dime in interest. This could be for only a specified period (such as zero percent financing for six months--which means the customer has six months to pay only on the principal), or it could be for the entire life of the loan.

Zero Percent Financing Benefits

Zero percent financing is a big draw for car lots looking to hold a sale. Compared to loans found in the credit card industry, car loans typically have favorable APR rates to begin with. But to take it down to zero means the car buyer has only to worry about the principal when paying off the car--or at least until the initial promotional period is over.

Zero Percent Financing Drawbacks

For those individuals who have impeccable records when it comes to paying their monthly bills on time, zero percent financing can make a lot of sense. Unfortunately, no one is perfect. A missed payment or even a late payment can result in the zero percent terms being taken away and a rather steep APR rate being applied to the loan. This can be disastrous for someone budgeting for only a certain amount per month.

Cash Back Financing

"Cash Back" deals are a favorite of car dealerships because it doesn't come out of their pocket. Manufacturers offer these rebates, so the dealership is reimbursed no matter what. Cash back is very simple for the customer--pay $18,000 for the car, accept the $1,500 cash back rebate, and there you have it. Instead of paying $18,000, the customer pays $16,500.

Cash Back Benefits

If a car buyer walks onto a dealer's lot with cash in hand, cash back deals are usually preferable to anything on the financing side. These people are looking to avoid a monthly payment and simply get the transaction over and done with in a single stroke. Cash back is simply icing on the cake. Cash back from a car dealer can make sense for those looking for a loan, too, especially if they know they can get better terms on a loan through a third party.

Cash Back Drawbacks

Cash back may not be the way to go if third-party financing can't beat the zero percent offered by the dealership. This sounds like a no-brainer (how can a finance company do better than zero percent?). But you have to look at the whole picture.

Zero percent on the entire cost of the car may still be a worse deal than a good cash back program combined with a low APR financing loan from a third party. Another drawback to paying cash up front is that the money could be better used for investment in the meantime. Giving it all to the car company may avoid a costly loan, but it doesn't do anything to make the money work for you, especially when considering what a poor investment a new car is in the first place.

Considerations

Consumers have to be aware of bait and switch techniques commonly used by car lots to bring customers into the showroom. Often, the best financing rates, including zero percent, are only available on a select number of cars. They are there as a sort of loss leader, intended to lure shoppers into the hands of a competent salesman who can direct their attention to another deal.

In any case, customers should be careful to do the math on any purchase choice. Check with third-party finance companies and compare rates with what the dealership is offering. Don't allow limited time promotional periods (such as zero percent financing for the first six months) to sway your judgment.

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Will Financing a Car Lower My Credit Score?

Financing a new or used car usually requires a good credit score, according to the Lease Guide automotive website, although borrowers with some past problems can sometimes get high-interest loans. The vehicle loan itself affects a consumer's score once it is finalized. It has a mix of positive and negative influences depending on various factors.

Definition

Car financing means getting a loan to purchase a new or used vehicle. Cars are generally expensive, so consumers often borrow money instead of paying the full amount up front. Some people get their financing through the dealership, but Lease Guide explains that dealers themselves do not provide loans. They work with banks and finance companies, which actually provide the funds. Car buyers can also arrange their own financing through banks, credit unions and other lenders.

Negative Effects

Car loans add a lot of debt to a person's credit records, especially when purchasing a new vehicle. FICO, the main credit score provider, explains that it considers outstanding debt in its calculations. If that person has high balances on other loans, credit cards and accounts, the car loan brings the credit score down. Skipping any payments or sending them in late also hurts the score.

Benefits

Borrowers with good credit records can raise their credit scores with car loans. The payments show up on the credit reports, and Edmunds automotive site editor Warren Clarke advises that payment history accounts for more than one-third of the score. Prompt remittance on the car loan, along with any other accounts, is very favorable in a person's credit file.

Considerations

The Experian, Equifax and TransUnion credit bureaus do not always report accurate data. A responsibly handled car loan could be unjustly hurting a person's credit score because the bureaus are reporting timely payments as late. The Federal Trade Commission explains that federal law entitles everyone to free yearly credit reports through annualcreditreport.com. This lets borrowers check their loan status and dispute errors. The bureaus or obligated by the Fair Credit Reporting Act to investigate such matters and correct or remove mistakes.

Warning

Consumers who overextend themselves with high car loans can destroy their credit ratings if their vehicles are repossessed. The FTC says most vehicle financing contracts give lenders the right to take back the car as soon as the loan goes into default. This means one late or missed payment is grounds for vehicle reclamation. A repossession seriously hurts a credit score and stays in a person's credit bureau files for seven years.

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How to Cancel a Down Payment Check on a Purchased Car

When purchasing a car, many car dealerships handle the arrangements for financing a vehicle on behalf of the customer. Often, a car dealership will allow the customer to take the car home before the financing is finalized. Because unexpected complications can occur, the customer may not be ultimately approved for a vehicle loan despite having made a down payment with a personal check. By the time the customer is alerted that she is not approved for vehicle financing, the customer has the option of contacting her financial institution and placing a stop on the check before the funds are debited from her account.

Instructions

1

Contact your financial institution. Provide the customer service representative with all information necessary to identify you as the account holder.

2

Ask the representative whether there is still time to place a stop on the check. Provide the check number. If there is still time, provide the amount of the check, who the check was made payable to and any other information the representative requires to process the stop payment.

3

Pay the fee for stopping the payment. Often, a financial institution will debit this fee directly from the account the check was drafted from.

4

Inform the dealership that you have placed a stop payment on the check. Depending on the laws of the state you did this in, you may be liable to the dealership to pay a fee. If this is the case, pay the fee.

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The Depreciation of RVs

Recreational vehicles, or RVs, give their owners the opportunity to vacation in a wide variety of destinations, relatively inexpensively. Traveling in an RV allows you to bring your own living space with you, and sites at campgrounds or RV parks cost far less than comparable hotel rooms. But buying an RV means you'll have to deal with depreciation, which refers to the value an RV loses as it ages.

Reasons

RVs depreciate for many reasons, some of which they share with cars, which also depreciate at a generally high rate. Used RVs represent risk for new buyers, who don't know the service history or whether the prior owner made necessary repairs. The value of an RV also falls when new models with additional features come to market, driving down demand for models that lack those features. RVs consume fuel at a high rate, which can drive down their value when gas prices are high. Finally, mileage and general wear and tear mean that a used RV has a shorter life than a newer model.

Rates

The specific depreciation rate for a given RV depends on factors such as location, condition and features. According to The New York Times, RV Consumer Group Inc.'s J.D. Gallant estimates that a new RV loses between 25 and 40 percent of its value as soon as a buyer takes it home. This extends to an average depreciation of up to 50 percent after five years. After around 10 years, the majority of RVs are unsuitable for normal use and have very little value left.

Minimizing Depreciation

RV owners can take steps to reduce the depreciation of their vehicles. This begins with the choice of which RV to buy. The Times cites the fact that desirable brands hold their value well, although some luxury RVs tend to depreciate more quickly than average, because buyers who can afford the most expensive models prefer new to used. Owners can also perform regular maintenance and keep all service records in an effort to persuade potential buyers to offer more for a used RV. Buying a used RV in the first place eliminates the high, early depreciation.

Other Options

In most cases, depreciation is unavoidable with an RV. Shoppers should consider other options before buying. Leasing an RV is one alternative that allows vacationers to determine whether they enjoy it enough to justify buying one and dealing with depreciation. Traveling by car, train or plane are other options, with costs depending on ticket fares, the cost of fuel and the price of accommodations. Camping with a tent, which requires only enough gear to fill a car, van or SUV, is a simpler and more affordable alternative to RV ownership.

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The Pros & Cons of Leasing a Low Mileage Car

Low mileage leasing offers a lower lease payment. Leasing is based on expected depreciation, so if you choose to take a lower mileage option, the vehicle won't depreciate as fast. Before pursuing a low mileage lease, consider your driving habits, vehicle needs and the financial repercussions of going over your contracted mileage allowance.

Lower Monthly Payment

A lower monthly payment is the ultimate benefit of a low mileage lease. Leasing is based on the vehicle's depreciation, which is affected by the term and mileage you choose. For example, a leasing bank might assume that a three-year old vehicle with 30,000 miles on it might depreciate by 48 percent during the lease term. The same vehicle with 36,000 miles on it depreciates more, so the depreciation percentage, or the amount you pay for during the lease, increases along with your monthly payment.

Driving Habits

As long as your low mileage lease matches your driving habits, the option is beneficial. A low mileage lease may not suit someone with irregular driving habits. A lower mileage allowance, such as 10,000 miles per year, may prove hard to maintain, as it offers less than 1,000 miles per month. To benefit from the low-mileage option, your driving habits should be stable. If you commute to work, constantly drive your family around or are unsure about your future job or house location, you might want to increase your mileage to avoid potential penalties.

Mileage Penalties

Because your lease is based on expected deprecation, going over your mileage allowance results in penalty fees. The amount a leasing bank might charge differs, but expect to pay anywhere from 10 to 18 cents per mile over your contracted mileage allowance. This can prove expensive if you go over your mileage substantially. For example, if you exceed your allowance by 6,000 miles, you may pay between $600 and $1,080 in penalty fees, based on 10 to 18 cents per mile charges. You must pay the leasing bank for the fees; otherwise, non-payment is reported to the credit bureaus.

Considerations

If you question whether you can meet the mileage requirements for your lease, adjust the mileage to match your driving habits. Rather than limit your vehicle use to obtain a low monthly payment, check price differences for 12,000 or 15,000 miles per year. The cost to increase your mileage allowance is not substantial; it may cost you less than $10 a month to increase the leasing mileage allowance. Ask your dealer to show you the monthly payment for both.

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How to Buy a Car With No Cosigner

First-time car buyers and individuals who have a lack of credit history will often hear the same message from financial institutions when trying to take out a loan: "A cosigner may help get you approved." While a cosigner will help you get approved, you may not have someone who's willing to cosign a loan and therefore promise to make the loan payments if you cannot. You can get around the need for a cosigner by dealing in cash, purchasing a car from a different dealer or building your credit.

Instructions

1

Purchase the car with cash. Purchasing a vehicle outright allows you to bypass the need for a cosigner and having to pay extra money for interest. If you can't afford the cost of a new car, consider purchasing a used car. Many dealers have portions of their used inventory dedicated to $10,000 vehicles and under.

2

Visit a "buy here, pay here" dealer. "Buy here, pay here" refers to dealerships that approve you for loans via their own financing department. You pay off the loan by making payments at the dealership. These dealerships typically charge significantly higher interest rates than traditional financial institutions, because they often approve individuals with poor or nonexistent credit history. Because these dealerships are willing to work with risky individuals, you usually won't need a cosigner.

3

Build your credit. Applying for and using a credit card offers you the best opportunity to start building credit. Make your payments every month, and your credit will steadily increase. Once you have a strong credit score, such as 620 and above, financial institutions will begin seeing you as less of a risk and will probably not require a cosigner. If you are not approved for a standard credit card, apply for a secured credit card through your bank.

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