Purchasing a vehicle with a lien can be a huge problem. The lien holder can come after your new vehicle and you might run into problems with the Department of Motor Vehicles (DMV). However, checking public records with the DMV and asking the current vehicle owner for official documentation from the lien holder stating the loan obligation has been met is important in protecting yourself.
Review the vehicle title. On the vehicle title, the owner’s full names will be listed. If the vehicle has a lien holder, the party will be listed on the title as well. For example, on the first line the title might read Jane and Joe Doe. On the second line, it might say ABC Bank.
Ask for proof of payoff. If the seller says the lien has been paid in full, ask for proof. For example, an account statement will show the vehicle loan balance. You can also request the seller get a formal letter from the financial institution stating the vehicle has been paid in full.
Write down the vehicle identification number (VIN). Don’t ask the seller to provide the VIN, get it yourself. The VIN can be found on the driver’s side of the vehicle on the dashboard--it’s a 17 character number. Double-check the number against the VIN located on the registration paperwork.
Visit your local Department of Motor Vehicles (DMV). Ask the DMV to do a search on the vehicle. This report will provide a variety of helpful information, such as if the vehicle has a current lien holder and if the vehicle has every been in an accident.
Use online resources. Another option for finding out if a vehicle has a lien is free online resources, such as Carfax (See References).
If the vehicle has recently been paid off by the owner, it can take up to 60 days for the title to be released from the bank. This can delay the transaction.
Consider using a few different methods to determine if a vehicle has a lien holder. This will provide more confidence that the vehicle doesn’t have any unexpected liens.
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