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Is It Illegal To Sell A Car With A Lien on It?

If you’re a car owner with a lien on your vehicle, you might be wondering, “Is it illegal to sell a car with a lien on it?”

The answer is yes; if you sell a car with a lien on it without disclosing the existence of the lien, that is illegal.

Important Articles To Read Related to This Topic:

Can You Sell A Car That Has A Lien On It?

No, you cannot and will not be able to sell a car with an active lien on it, period! 

If you were to try and sell a car with a lien, the buyer would be immediately alerted of the lien by the DMV when they applied for the title and would be blocked from any further action.

To sell a car with a lien on its title, the lien must be released by the lienholder first (With no exceptions).  

Getting a lien released involves paying off (In full) any outstanding debts for which the vehicle was used as collateral. 

Fact: most liens attach not only to the car but also to the person who owns it. This means that even if you sell the car, you are still responsible for making the payments on the lien. If you fail to do so, the lienholder (usually the bank or financial institution that gave you the loan) could potentially take legal action against you.

Does My Title Have A Lien? [How To Check Your Title]

Some of you may be reading this article and thinking, “I already paid off my loan and had my lien released, so I’m good,” or, “I never had a loan on my car, so there would be no reason for me to have a lien in the first place.”  

Most of the time, you would be right; however, lenders and banks not properly releasing liens after payoffs are almost as common as blue skies.  

Then there are liens like a”mechanics lien” that can be placed against a title that people honestly might never know about.  

So, how can you avoid the embarrassment of going to sell your car only to find out that you can’t? 

Simple Google Search (The State Of The Title), then “Vehicle Information/Title Check,” and you will be able to see the most up-to-date information on your vehicle or a vehicle you are interested in purchasing. 

If you live in Florida where Autohitch is based, use this link for a Vehicle Information Check

Important- You must check the system of the state the title was issued in, not the state you live in.

How to Buy Or Sell a Car With A Lien On The Title

To legally sell a car with a lien, you must have the vehicle’s title, which your lender will have in their possession unless you live in a state that uses E-Titles, such as Florida.

Either way, to get the title free and clear, the lienholder must release the lien, and the only way they will do that is if you pay off any remaining balance you owe in full.

Most lenders offer online tools or a phone number to call to receive your payoff amount. This is the exact amount to be paid to obtain your title.

1. Selling a Car With a Lien to a Dealership

If you’re selling a vehicle with a lien to a dealership, they’ll typically pay off the lien through your lender and transfer the title on your behalf.

However, if you’re selling to a private party, you must handle these steps yourself as it is not the buyers responsibility.

2. Dealing with Negative Equity

If the payoff amount for your loan is more than your car’s value, you’ll have what’s known as negative equity. In this case, you’ll need to pay the lender the difference between the payoff amount and the car’s value to get the lien released.

3. Using an Escrow Service

If the buyer or lender is in another city, you can use an escrow service to handle the transaction. The buyer pays into an escrow account, and when you hand over the car, the escrow company transfers the money to your lender to pay off the loan.

How Do I Get A Lien Removed From A Car Title?

This is fairly standard for all states, but the first step will be to contact the lien holder and request a “Payoff Amount.”  

Once you make the payment in full, the lien holder will issue a written “Lien Release” to you (Though the mail) accompanied by direct notification to your state DMV that you have satisfied your debts and that the lien on your title should be removed.  

If this was your only lien holder and they also had possession of your physical title, then you will get your title along with your lien release.  

If you have an E-Title, you won’t automatically be sent anything; you will have to request a physical title from your DMV, which is a process that can usually be done online. 

Note– You will need a physical copy of your title to sell your car as you cannot (As of 2018) sell a car strictly with an E-Title; you need something that you can actually sign over to a buyer.

Tip:  Don’t lose your Lien Release from your lender.  If they did not properly notify the DMV, you can use this document to handle everything yourself and get it resolved quickly.

Buying Or Selling A Car With A Lien On The Title Autohitch 2
Buying Or Selling A Car With A Lien On The Title

What Does A Lien On A Title Mean?

A “Lien Title” (Typically a title for a car) is a title that has had a lien or levy applied to it by a 3rd party using a car or truck as collateral (Usually for a loan or unpaid debt).  In these cases, the lien holder is often the party who actually holds the physical title until such time that the debt or claim has been satisfied.

Is A Lien title Bad?

This is a difficult question to answer because there really are two ways to look at lien titles.  On one hand, a lien title is as common as a mortgage because a vast majority of cars are bought using some type of financing.  On the other hand, if you are looking to sell a car with an outstanding lien, it can severely hamper your ability to do so for a couple of reasons:

  1. Removing a lien isn’t done electronically; it takes processing and paperwork, which takes time, even if done correctly.
  2. Selling a car privately with a lien is practically a deal killer as most buyers are looking to pay and drive away, not become part of a process.  A vehicle with a lien also tells potential buyers the price may not be negotiable, which is also a massive turn off even when the price is fair.

Those two scenarios aside, if you are looking to sell or trade in a vehicle with a lien to a dealership or a car-buying service, it’s really no problem at all.  For them, it’s just another day at the office.  Bottom line- The measure of whether a lien title is a good or a bad thing will vary upon your specific experience and how you intend to sell the car.

I Bought A Car With A Lien On It [What Do I Do?]

As we covered above, if someone sold you a vehicle that had a lien and they did not disclose that, they have broken the law; however, that fact alone will not get you your money back because the money exchanged is considered to be a civil matter.  

You will have to consult an attorney or start looking through your state’s laws to determine the next step because each state can/will be different.  

For one, the price of the vehicle may play a role in your potential options as small claims courts usually top out at $5000.

Can an Individual Put a Lien on a Car?

While liens are typically held by lenders or service providers like mechanics, individuals can also place them on vehicles when loaning money for a car purchase. However, strict regulations apply:

  • Individual lenders must follow proper procedures to establish a valid lien.
  • Repair shops or mechanics can lien cars for unpaid service bills.
  • Lienholders gain certain rights like repossession of the vehicle if loan terms are breached.
  • State laws dictate requirements for enforcing liens through vehicle seizures or sales.
  • Illegally selling a car with an active undisclosed lien is unlawful.

So, individuals do have lien options given the right circumstances. However, ensuring full legal compliance based on where the car is registered is critical when placing and enforcing individual liens.


The main thing to focus on in dealing with vehicle liens is to not get overwhelmed.  Have a process in place and follow it. 

If you are buying a used car from a private individual, all you have to do is check the DMV records online, and you will know right away if there is a lien. 

Everyone can forge paperwork all day, but they can’t fake the state database.  As always, if we did not cover something that applies to you and you still need help, feel free to drop us a line in the comment section below.  I would happily answer you directly and get you the information you seek. 

Thanks for reading, and Happy Car Buying and Selling!

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Picture of Steve Momot - Author

Steve Momot - Author

Steve, a seasoned expert in the automotive industry, formerly held a car dealer license in Florida. With extensive experience spanning across car trading and mechanical work, he founded Autohitch. His mission? To guide both buyers and sellers through the intricate maze of car purchasing, ensuring a seamless and informed experience. Outside of the automotive world, Steve has a passion for fishing and capturing the beauty of nature through photography.


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