Why You Need a Lien Release to Sell a Car

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Selling your car can be quite profitable.
Selling your car can be quite profitable. (Image: vitranc/iStock/Getty Images)

A lien can be placed on your vehicle for a number of reasons, most commonly as the result of an auto loan. This documents the lender’s financial interest in the car, which must be satisfied before it is sold. A lien release is documentation from the lender that this interest has been satisfied. To obtain the release so you can sell the car, you’ll need to pay that debt.

Satisfy the Lien

As a general rule, you can’t sell a car without a clear title, or without making arrangements to clear the title. Failing to satisfy the lien holder can place you at risk of legal action. The lien holder has the right to repossess your car if you sell it without paying the loan it took against the vehicle. The buyer also can take legal action if you fail to disclose the existing lien. A release therefore protects everyone involved in the vehicle sale.

Securing the Release

If you’re trading in a vehicle with a lien to buy a new one at a car dealership, the dealer will take care of the lien release paperwork for you. If you’re selling the car privately, however, you’ll face a trickier task. One solution is to place the buyer’s money in escrow until the clean title is retrieved. Another is to go with the buyer to the bank or credit union that holds the lien, and then close out the loan and transfer ownership at the same time.

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