Selling a Car with a Lien


The security on your car loan is the vehicle itself. This means that in the event of not paying your car finance’ monthly EMI on time, the lender has the legal right to take possession of your car. This right of the lender is enforced via a lien on the title of the car at the time of financing itself.

Since a car without a clear title (or a car with a lien on it) is not a buyer’s favorite, you might want to know the steps involved in selling such a car. It is important to know this because you might want to prove to the potential buyer that you have a clear title (even before you obtain the same).

How to Sell a Car with Outstanding Finance?

The following are the steps that you have to remember while selling a car with a Lien on its title.

  1. Find out your outstanding loan amount with the lending institution by calling them up
  2. If you have enough money with you to pay off the loan, on payment of that amount a lien release acknowledgement will be provided to you even before obtaining the title. The lien release document is good enough to find any potential buyer and for your potential buyers to process their car finance
  3. If you do not have enough money to close out the loan amount and obtain the title, you may use an escrow service (such as to sell a car with a lien. With the escrow, you have the possibility to close out the loan and transfer the car to new ownership
  4. When you use the escrow service, you and the buyer enter an agreement on transfer of ownership. The buyer will be responsible to pay off the lien as and when the ownership is transferred to him or her
  5. Sign over the title during the sale and contact your lending institution to check if you can transfer the title to the buyer. The lender usually makes an appointment with you as a seller and the buyer to complete the transaction and obtain the bill of sale
  6. Visit your DMV (Department of Motor Vehicles), show the bill of sale to obtain a temporary operating permit for the buyer
  7. As a last step, obtain the title from the bank and hand over the same to the buyer

That is all you have to do to sell off your car with a loan whereby the title is held by the lending institution.

The explained steps are needed only when you sell your car with a lien to a private buyer. When you sell the car to a dealer or trade in your old car, many of these steps are simplified.