A vehicle is one of the most expensive purchases families make, second only to housing. Average new car prices hovered right around $40,000 in 2020, so it's not surprising that folks take out a loan to help cover the purchase. This loan includes a lien placed on the vehicle by the lender. This means the lender actually owns the car until you've paid the debt. Of course, lenders aren't the only agents able to place liens on vehicles – mechanics, tow operators, and storage facilities can also do so for unpaid bills.

It might not feel great knowing someone else can hold ownership papers over your head for something in your possession, but it's actually more common than you'd think. Just because you're still paying on your current vehicle doesn’t mean you can't sell it. Many people outgrow a sports car when they start a family, for instance. Selling a car with a lien can be done – it's just more complicated than a traditional car sale, especially if you hope to maximize your profits by selling to a private buyer.

Even that's doable, especially if you've got patience and the correct information. You've got several options available for selling a car with a lien on it. Here's a list of tips to help make the process as smooth as can be:

1) Tell the buyer.

This isn't something you can negotiate – it's a must. Any potential buyer should be told upfront about any liens against the vehicle. You could lose a potential sale when the buyer finds out there's a lien against the car, but you're much likelier to lose the sale if you fail to mention it. Dishonesty is the number one reason people cease negotiations and continue looking elsewhere.

2) See how much your car is worth.

Don't just take the word of a friend or dealership. Check out Edmunds or Kelley Blue Book for your car's actual private sale value based on year, make, model, and condition. This figure means a lot in conjunction with outstanding payments.

3) How much do you still owe?

Speaking of those outstanding payments, figure out how much you still owe on the vehicle. Knowing this exact amount helps you figure out an amicable asking price. Ask too much, you might not make the sale. Ask too little and you could still owe. If you do owe more than the vehicle's private resale value, it can complicate the process.

8 Tips for Selling a Car with a Lien

4) Decide if you want to trade up at a dealership or sell your car to a private party.

Nine times out of 10, you'll get a better deal selling a car with a lien in a private sale. That said, selling your car to a dealership can prove easier if you've got a lien to deal with. Dealerships are especially equipped to handle complex sales of this nature. They're used to dealing with lending institutions and, in some cases, may already have an established relationship with that lender, mechanic, or tow operation. They pay off the lien and pay you for the vehicle. No matter what, never take less than KBB's valuation when selling to a dealership.

If you decide selling your car with a lien to a private seller is your best bet, at least obtain quotes from a few neighborhood dealerships. This way, if you don't sell the car to a private party, you've got another plan.

5) Transfer your loan or debt to the buyer.

In many cases, especially a car loan, you can transfer the lien to the buyer. Usually, the buyer must qualify for contract assumption with whoever currently holds the lien. If the lien is held by a lending institution, this may involve a credit check or other means of determining creditworthiness. If the lien is held by a tow truck company or mechanic, chances are the buyer will just need to present information that shows their ability to pay off the lien.

Transferring the lien in this manner:

  • Makes sure the contract is paid off.
  • Protects all parties from fraudulent activity.

It's not advised to give the buyer a vehicle without a title while you continue making payments on the lien for several reasons, such as:

  • The buyer could damage the vehicle and you're still on the hook for payments.
  • The buyer is unable to get a free and clear title until you've finished making payments.

In either scenario, someone loses.

6) Use escrow services.

With an escrow account set up, the buyer places the money in the account and you cannot access it until the lien holder releases their stake and the title is free and clear. This protects your buyer and ensures they don't lose money if the lien is not released. There may be fees associated with opening an escrow account.

If you sell your car with PrivateAuto, all of this takes place within the app.

7) Consider refinancing locally.

If you're selling a car with a lien in your local area, but the loan is handled by a lender outside of town, consider refinancing the purchase with a lender in your area. When you're ready to sell, you can work face-to-face with the lender and private buyer. Worried about a higher interest rate? If you have a serious buyer, the interest rate won't matter. It's the local convenience that you're after here, which can help you close the deal faster.

8) Set up a meeting with all parties – you, the lienholder, and the private buyer.

If it's a tow operation or mechanic that holds a lien on your car, arrange a meeting with all interested parties to have a title signing and, potentially, satisfy the lienholder's debt, provided the buyer is ready to pay. No matter what, the buyer must obtain the title in order to transfer vehicle ownership. If the buyer assumes the debt of the lien, they must transfer that responsibility, as well.

Sell Any Used Car on PrivateAuto

If your car isn't free and clear, you can sell a car with a lien on PrivateAuto. We're the safest, most reliable way to sell a car privately. You can sign all necessary paperwork right in the app from the comfort of home. List your car today or browse our listings if you're in the market for a new-to-you used car.