When purchasing a car, a lot of people opt to finance their purchase with the help of a loan instead of paying with cash. Moreover, a car loan is also referred to as lien. Basically, it is an agreement between the borrower and lender that says the borrower will make monthly payments of a set amount until the entire loan is paid off.
The lender is also known as the lien holder. Technically, the lien holder owns the vehicle while you are the one making the payments. When you pay off the loan, that’s when you become the legal owner of the car and that’s when the lien is removed from the title.
However, there are certain situations when you might want to sell your car before the loan is completely paid. Maybe you are planning to move to a different city when you want to use public transportation or the cost of owning the vehicle is becoming way too expensive for you.
Remember, selling a car with a lien is not illegal and there are no penalties if you do so. However, you must handle it correctly. Selling a car you completely own is without a doubt much easier than selling a car with a lien. Listed below are steps you need to take to sell a car with a lien.
Steps to sell a car with a lien
Determine your payoff amount
In case you have a loan balance, you must pay it off so the lien can be removed from the title. However, you need to know that the amount you have to pay is the total amount owed, also known as the payoff amount, which is different from the outstanding balance on your statement. Due to the interest, the payoff amount includes the full amount that you have to pay to the lender.
The next step is to get into the process of selling your car. You can take the vehicle for service, get the system checked, and make any necessary repairs. It is best to invest a little time and money to get your car washed, serviced, and repaired before presenting it to potential buyers. When selling a car with a lien, you can’t just hand over the title and collect the payment. You either have to sell the vehicle through an auto dealership or sell it privately.
Selling through an auto dealer
If you want to trade the car for something different, it is best to opt for an auto dealer. There is no work that you’ll have to do. When you purchase a new vehicle from a dealer, they’ll pay off your loan with the help of proceeds from the trade-in.
Selling your car with a lien privately
You can also sell your car to a private buyer. The selling process is quite simple. You find the buyer, show them your car, and agree on the price. However, before you give them the title, you must pay off the loan and sort out selling details.