Buying a Used Car with Outstanding Lien

[99Saturn]

Anyone done it?

From what I'm seeing online:
1. buyer should go to the bank with seller
2. pay off the balance of the outstanding loan
3. receive a letter from the bank saying the loan has been satisfied and the lien is removed (does this happen instantly?)

Other thoughts/pitfalls/precautions to take?

Add: FWIW, I'm thinking of NY specifically, although I think/assume the process is similar in most states, in NY the seller/owner holds the title and the title indicates there is a lien outstanding. From looking online, it seems that the lending institution actually holds the title until the loan is satisfied.

 

[eljefino]

Have the bank have the title at the branch you go to. This will require preperation on the seller's part to call ahead. The loan officer signs a part of the title that satisfies the lien. Make sure there isn't a 2nd lienholder. The seller should also sign the title and the loan officer should guide you through this.

If the state has e-titles, make them spit out a paper copy.

Otherwise, DO NOT TOUCH.

 

[eljefino]

Edit, if the owner has a title with a lien on it it's probably a "memo title" used for registration but not ownership.

If such copy exists, the bank should have an official DMV bunch of paperwork, not just a letter and signature, to release their "piece" of the title.

Regardless, do it at the bank, in a conference room.

 

[mclasser]

Unless the car is uber spectacular and trumps the other ones you've seen, I'd pass. Not worth the hassle.

 

[dernp]

Definitely not worth the risk.

 

[Donald]

Its not a big deal at least in NY. The owner will have the actual title but it will be marked LIEN. The buyer needs to go to the bank that financed the vehicle, and give the owner and bank money and they will give you a lien release document. You bring the title and lien release document to DMV and pay sales tax and get a new title (actually i gets mailed).

 

[99Saturn]

Originally Posted By: Donald
Its not a big deal at least in NY. The owner will have the actual title but it will be marked LIEN. The buyer needs to go to the bank that financed the vehicle, and give the owner and bank money and they will give you a lien release document. You bring the title and lien release document to DMV and pay sales tax and get a new title (actually i gets mailed).


Donald - In your experience, is that a letter or a DMV form - the form online looks like MV-901, I'm just not sure which one to expect. It seems like it might be MV-901 according to the NYS DMV site, though I can't find a copy of the form.
---
Also for those of you in NY -

Title/Lien Status Check

 

[Panzerman]

I bought a motorcycle once like that. I went into the bank with him, he paid off the bike, they handed him the title and he signed it over to me. He would have to arrange the pay off with the bank for the day of. It should be that easy though.

 

[MNgopher]

If you can, arrange to transfer the title at the bank where the loan is held. That is the only way to get an immediate lien release.

I've also completed a sale in a case where this was not possible. In that case, I made payment directly to the bank to pay off the loan, and took possesion of the vehicle. We completed a bill of sale that the balance of my payment to the owner was contingent and due upon receiving the lien release. This takes trust, and I'd only do this in a case where the person you are buying from is reputable or somehow known to you.

 

[razel]

Cars with leins has an entertaining history in my neighborhood. One car had a lein from a bank, but it was a lein specifically coming from a bail bond.

The 2nd lein was from a divorce. It had the name of the previous owner, but we didn't bother to get details. My friend and I just joked... so it's half paid off?

I was not there to assist my friend with the lein so I do not know the details, but it he was not stressed about it.

 

[dparm]

Why does it have a lein? That could just mean that it has an open loan, because someone is still making payments on it. That's exactly what you'd expect on a used car from a private seller, unless they've already paid it off.

I have bought and sold used cars that still had liens. It's not a big deal.

 

[99Saturn]

Originally Posted By: dparm
Why does it have a lein? That could just mean that it has an open loan, because someone is still making payments on it. That's exactly what you'd expect on a used car from a private seller, unless they've already paid it off.

I have bought and sold used cars that still had liens. It's not a big deal.

Good point - I was referring to someone making payments on a loan from when they purchased, nothing out of the ordinary.

 

[eljefino]

Originally Posted By: dparm
Why does it have a lein? That could just mean that it has an open loan, because someone is still making payments on it. That's exactly what you'd expect on a used car from a private seller, unless they've already paid it off.

I have bought and sold used cars that still had liens. It's not a big deal.


It is a little unusual around here to sell a car with lien to private party. Either people stick it out for the payments-- sometimes selling a car immediately after the last monthly nut-- or they roll an unpaid car loan into a new car and yet bigger note.

It's just so awkward to be trying for a private sale. Maybe a dealer offered them $300 or something and offended them...

 

[Donald]

Originally Posted By: 99Saturn
Originally Posted By: Donald
Its not a big deal at least in NY. The owner will have the actual title but it will be marked LIEN. The buyer needs to go to the bank that financed the vehicle, and give the owner and bank money and they will give you a lien release document. You bring the title and lien release document to DMV and pay sales tax and get a new title (actually i gets mailed).


Donald - In your experience, is that a letter or a DMV form - the form online looks like MV-901, I'm just not sure which one to expect. It seems like it might be MV-901 according to the NYS DMV site, though I can't find a copy of the form.
---
Also for those of you in NY -

Title/Lien Status Check


What are acceptable proof that a lien is satisfied?

There are two acceptable proofs. You can provide the DMV either.

Notice of Recorded Lien (MV-907). The lienholder can send this to you. An authorized officer of the lienholder must sign the form and indicate that the lien is satisfied.

A letter from the lienholder. The lienholder must print the letter on the official letterhead of the loan company, and an authorized officer must sign the letter. The letter must identify the vehicle and indicate that the lien is satisfied. If the lienholder is a person and not a loan company, the letter must be notarized.

 

[Donald]

I bought my Dodge Ram from a guy in MA (I live close to the border) and the vehicle had a lien. Maybe a little trusting on my part, but I had the guy deliver the truck to my house on a flatbed. I gave him the money and got a bill of sale. He then paid off the lien the next day and mailed me the title.

 

[andyd]

That is what I like, trust between men to make a deal. It does happen and that is good. My son bought a car from a member on a car forum I was on.He let us drive the the car home on his registration. And we mailed the reg and the plates back to him. When I bought the Rat, I had to e-mail the seller's mother for the title and the process went smoothly. No body was home when I slipped an envelope with 600$ under the front door. Good people happen.