Why Do I Need a Lien Release to Sell a Car?


If you have a lien listed on the title to your automobile, then you do not fully own your vehicle; a bank is listed as a lien holder when it has partial ownership. Even if you paid off the loan, you must prove it by providing the lien release.

If you cannot provide the release, your potential buyer faces risks for any money you owe on the vehicle.

Lien Release to Sell a Car


Lien Reporting

Your title lists a bank as a lien holder on it. This means that a bank has financial interest in the vehicle and that you do not fully own it, unless you can provide a lien release that clears the title.

The lien release officially proves that the debt is satisfied and allows transfer of ownership to the buyer. In the event you sell your vehicle, providing the original lien release allows the new owner to title the car in his name without the lien holder present, as it is on your current title.

Some states allow title transfers when a lien exists and some do not.


Lien Release

A lien release is an official letter from the titled lender that states the vehicle loan is paid in full. It is printed on bank letterhead and is signed by a bank representative. Also, the titled borrower’s name and address is listed on the letter, as well as all vehicle information.

This includes the car’s year, make, model and the vehicle identification number (also known as the VIN). You must provide the original letter with a signed title to transfer ownership.


Personal Liability

In states that do allow title transfers when a lien exits, purchasers usually will not purchase the car if the title is not clear. If you still owe money on the vehicle, it can be repossessed from the new owner.

If you leased the car before buying it, the lien can signify that you never paid your taxes on the purchased car. To avoid liability for your debts, the buyer will likely request a lien release, even if your state does not require it.


Handling Lien Releases in the Future

Because your bank will send you a lien release once your loan is paid off, you can apply for a new title. If you bring your lien release and your current title to a motor vehicle office, you can have a new title issued in your name alone.

Or, you can put the lien release in a safe place to include with your title for when you are ready to sell. Obtaining a new title eliminates the need to keep the lien release.

If you are ready to sell your car and cannot locate the release, obtain a new one from the bank that is listed as the lien holder.



Paperwork Needed to Donate a Vehicle in Texas

Leave A Reply

Your email address will not be published.