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How to Resolve a Private Seller Lien

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Remove the lien and take ownership of the vehicle.

2016 Ford Fiesta ST
2016 Ford Fiesta ST

When shopping for a used car, you stand to save money on your purchase when buying one from a private seller. Dealer markup can add hundreds to well over a thousand dollars to the price of a car, money you can save by negotiating directly with the vehicle’s owner.

If the owner is still making payments to a lender, then there is a lien on the car to remove before you can buy it. A lien essentially locks down the car’s title until the loan obligation no longer comes into play. The following are the steps to take to resolve the lien:

Step No. 1: Learn the Vehicle’s History

No used car deal should take place before confirming the vehicle’s repair history. That information is available through various sources, including Carfax.com, a company that compiles vehicle history reports specific to a car’s vehicle identification number (VIN).

A vehicle history report should show most of its repair history except the work that the owner performed on his own, work not reported by independent sources and anything else not reported by a repair shop. Importantly, if the car has been in an accident or damaged by a flood, then the history report should reveal that information. But they’re not perfect, so buyer beware. (Here is an excellent article that details the limits and sometimes the pitfalls with vehicle history reports — Limitations and Problems with Carfax or any Vehicle History Report).

2016 Honda HR-V
2016 Honda HR-V

Step No. 2 — Confirm Vehicle Ownership

Simply because an individual claims to own a car does not make that person the rightful owner. You need to inspect the title and run the VIN through the National Insurance Crime Bureau VinCheck to verify ownership.

VinCheck will confirm if a vehicle was reported as stolen, but unrecovered. It will also list whether it is a salvage vehicle, one that’s damaged or was seriously wrecked.

Step No. 3 — Inspect the Car With Care

Vehicle history reports can only reveal so much about a car. If you are handy, you can perform
the inspection yourself, otherwise, head to your mechanic and pay him to check the car.

Have the car placed on a lift and examine the vehicle’s suspension system, inspect the vehicle’s frame, review previous repair work and look for leaks from the engine, transmission and the coolant system. A mechanic can also pull up the check engine codes to look for potential problems.

No independent analysis will be foolproof, but your mechanic can offer his opinion on whether the car is worth your consideration and for the price you have in mind.

2015 GMC Yukon XL
2015 GMC Yukon XL

Step No. 4 — Negotiate Your Price

How much a private seller still owes his lender may have a bearing on your negotiation. However, if this individual owes more on the vehicle than what it is worth, you need not offer to pay that price.

Instead, your price for the car should be based on its current market value, its condition, mileage and vehicle’s trim level (content). Visit Kelley Blue Book to obtain its private party value. You can show your mechanic’s report to back up your offer.

Step No. 5 — Head to the Bank

Never give money to a private seller and have him handle the paperwork. Because there is a lien on the car, you should meet the seller at the bank and complete the deal in front of a representative.

Explain to the bank representative what transaction is taking place and have the seller ask for the loan’s payoff amount. Your funds plus whatever the seller still owes his lender will remove the lien, freeing the vehicle for a title transfer.

2015 Lexus RC F
2015 Lexus RC F

Let’s Make a Deal

Finalizing a deal for a vehicle with a lien on it is not always an easy process. That said, with persistence you may be able to conclude the deal and obtain a quality car for a below market price.

See Also — 8 Steps to Buying a Used Car

Photos copyright Auto Trends Magazine. All rights reserved.

Car Title and Personal Loan Collateral

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If you own your car outright, with no lien present, the equity that remains in your car can come in handy especially as you seek to borrow money. Specifically, if you are seeking to take out a personal loan from a bank or a credit union, you may be required to put up something of value to secure repayment of the loan. That item represents collateral or what your lender would seize if you default on your loan. Read on for tips on how a car title can lead to a personal loan.

LOANS

1. Retrieve your car title. Once your car note has been paid off, you will be issued an updated car title in your name. Find that title and verify that you are the owner with no lien present. If your title is missing or incorrect, then you will need a new one in hand before taking the next step.

2. Visit your lender. Likely, you have already shopped around for a personal loan. With your car title in hand, visit your lender and fill out a loan application. When you get to the part in the application where collateral is required to obtain a secured personal loan, identify the asset. In this case that would be your vehicle.

3. Discuss your loan options. A secured loan is one that backed by collateral. An unsecured loan is one that has no such requirement. A secured loan is easier to obtain and offers better loan financing terms including a lower interest rate. An unsecured loan is usually reserved for borrowers with very good or excellent credit. If approved, you will pay a higher interest rate. Choose a car title loan for favorable lending terms, understanding that you may forfeit ownership if you default on your loan.

4. Complete your paperwork. Fill out the entire application and present that along with your car title. If your application is accepted, your bank will issue you a check and will hold your car title until the loan has been paid off.

Car Title Considerations

If you are turned down for a car title loan, ask your lender for the reasons why. These reasons can include a checkered job history, insufficient salary, a low credit score or bad credit history. Your lender may also counter your loan request with a different offer, one that matches the value of your car.

For instance, if you asked to borrow $5,000 and your car is worth $3,000, you may receive conditional loan approve. That condition is that you agree to modified terms including a reduced loan amount. Make sure you understand what those terms are before signing your name on the contract.

Title Loan Notes

When you offer your car as collateral for a personal loan, your lender will notify your state’s department of motor vehicles that there is a lien on your car. Notify your insurance company to have the lender named as additional insured. You may need to increase coverage to meet your lender’s requirements — e.g., add collision insurance. Finally, stay away from shady lenders that want to charge you an exorbitant interest rate — no car title loan is worth it if your loan terms stink.

Further Reading

Consumer Federation of America: Latest Predatory Lenders Drive Borrowers into Debt With High-Cost Loans Secured by Cars

Zero Percent Financing: Is It Worth It?

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Auto financing is a big deal to Auto Trends readers. Our web analytics demonstrate that this is so with our guests frequently checking out what manufacturer incentives are being offered. We are happy to pass on that information to you, but you should also know that not every advertised deal is a good one.

loans

Zero Percent Financing

For a number of years, car manufacturers have been touting zero percent financing as an important incentive to get you to buy a new car. Such incentives come from the manufacturer’s financing arm, what typically is a wholly-owned subsidiary of the car company. Thus, when you get financed by Ford Credit, the Ford Motor Company stands behind this company.

Zero percent financing is both a big deal and usually a good deal. But not always.

If the loan deal is made the financing arm, then you have something worth looking at. However, if interest-free financing is offered by a lender other than the manufacturer-backed financing company, don’t be so quick to sign the loan.

Here’s why:

Car manufacturers can afford to offer you zero or very low-interest rate financing because that cost is built into the price of the car. Usually, if low question markrebate is dangled too. That rebate may range from $500 to $2,000, sometimes more, which shows you that the manufacturer is discounting the price of the car in one of two ways: through the loan or with the cash incentive.

If a dealer has a zero percent financing loan deal for you and it is not from the manufacturer’s financing arm, rather from a bank, a credit union or other financing company, you should be very cautious. That’s because no financial institution can afford to lend you money without making money.

Ford Credit, for instance, makes money because the Ford Motor Company makes money. Other lenders make money by charging you an interest rate. If you are offered zero percent financing, that means your dealer is likely jacking up the price of the car to recover his costs. After all, he has to pay the lender for the loan and that cost must be recovered somewhere — and that is where you come in. And you get fleeced.

Loan Qualification

There is another matter about zero percent car loans that few consumers realize: most people do not qualify for this ultra-low rate. As money advisor Clark Howard has noted, about 60 percent of car shoppers cannot get such loans.

The lowest interest rate loans are always reserved for people with excellent credit. It is kind of hard to read the fine print on your television, right?

Auto loan rates are calculated largely on the prevailing rates of our day as well as the personal credit score of the applicant. Excellent credit is typically around 750 and above. At 720, your score is still very good, but expect that zero percent financing loan to turn into one for two, three or four percent, perhaps more. That isn’t such a great deal after all — your credit union can beat it.

yell
The best way to buy a new car is with an all-cash deal.

The Deal

The best way to buy a car is paying cash for it. Only about 11 percent do according to Cars.com.

That leaves some type of financing for the rest of us with car leasing and auto loans your options. With an auto loan, you can seek financing through your dealer. You can also arrange your financing on your own.

Auto Trends has long encouraged people shopping for a new car to explore their financing options before hitting the dealership. This means talking with your banker or credit union representative about your loan options.

You not only can learn what your loan terms will be, but how much car you can afford. Get approved for you loan ahead of time and the entire financing deal is off the table. Negotiate the best deal for your car and when the talk turns to financing, you hand over your loan papers. If a cash incentive is offered, then use that toward your down payment.

Auto Calculator

Of course, always use an auto calculator to figure out what loan is right for you. If you have excellent credit, your options are much broader than sub-prime borrowers, individuals whose fate is a bad credit car loan or no loan at all.

How to Transfer a Car Loan to Another Person

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If you have a car loan and you want to transfer the loan to another person, is this possible? Well, that answer is not always clear cut it can depend on the policy of your lender, especially what is laid out in your car loan agreement. Still, that possibility remains and if you are interested in transferring ownership, the following procedures can make it happen.

Your Agreement

Your car loan contract should clearly spell out whether a loan can be transferred or assumed by a new party. Begin by examining your contract to determine whether this is possible.

key lockIf after examining the contract that you are still not sure, contact your bank or financing company for clarification. Get a hold of someone in the bank’s lending department that can pull a copy of your loan and make a determination.

Agreement Transfer

Your lender will most likely not allow for your auto loan to be automatically assumed by a new borrower. Instead, this individual may be required to apply directly to the bank for the loan transfer.

In this case, work with this individual to have the loan transferred. However, your bank may require that the future owner take out a new loan. Your purchaser will likely have to produce paperwork such as W2 stubs and income tax information to demonstrate creditworthiness. At this point, the loan application is between the purchaser and your bank.

Lender Approval

Do not attempt to transfer ownership of the vehicle to the purchaser until your bank has approved his loan application or accepted his transfer. The bank has a lien on your car anyway and the Department of Motor Vehicles (DMV) will not allow the car to be retitled until after the deal is done. As long as there is a lien on the car, the bank’s name will always remain on the title.

When your bank issues a new loan or accepts transfer of your current loan, you will receive notification that the loan has been transferred or paid off. If the purchaser is turned down for a loan, then consider the deal cancelled unless he can arrange financing elsewhere or pay cash for your car.

Loan Considerations

As long as the car is in your possession, continue to make payments on your car loan. If your purchaser succeeds in obtaining a new loan or a loan transfer, get a receipt from your bank showing that your loan is paid off. Notify the DMV that you no longer own the car, removing license plates, registration and personal information from the car.

Lastly, notify your auto insurance company that the car has been sold, a move that will immediately drop insurance coverage for the vehicle.

Special Note — Do not allow another person to take over payments without formally discharging your ownership duties. If something happens to the car — such as it is damaged or stolen — you will be held responsible.

See Also — Car Title and Personal Loan Collateral

How to Buy Out Your Car Lease

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You have been leasing your car for some time and are coming to the end of your lease term. Your mind is on what to do next, including whether to buy or lease your next vehicle. If you like your current car, you can keep it after the lease expires. Most leases include a “buy option,” one that allows you to purchase your leased car.

1. Review your paperwork. When you leased your car, you were given several pages of paperwork including a car lease agreement. That agreement spells out the terms of your lease and provides instructions on returning your car at the end of the lease term. It will also give you a dollar figure for what the car can be purchased for at the end of the lease term.

2. Get in touch with your dealer. Call the dealer where you leased your car and ask for the buy out price of the car. That price may differ from your lease agreement. If it comes in lower, you can take that amount or you may be able to negotiate a lower price. You can find out the current value of the car by visiting Kelley Blue Book and clicking on the link for “What Is My Car Worth?”. If the price comes in lower, use this information to negotiate a lower buy out price.

3. Arrange your financing. If you have cash to buy your leased car, then present a personal check to your dealer for the full amount. If you do not have cash, you can arrange financing to cover your loan. Your bank or credit union, or some other financing company, may extend a loan to you. Tarry Shebesta, president of Automobile Consumer Services Corp. recommends that you contact the bank that financed your lease and ask them for the buy out amount. He also recommends that you “get the phone number of the person in charge of making the decision” and explain that you would consider financing with them. Shebasta explains to Edmunds readers to make an offer and see if it is an amount that your lender can live with.

loans

4. Make an appointment with your dealer. When your financing has been arranged and you have a check in hand, drive your vehicle to the dealer and complete your paperwork. If you are paying cash, you’ll give your dealer a personal check. If you are financing your vehicle, your lender will supply a business check to you.

5. Visit DMV. Once you have finalized your transaction, visit your department of motor vehicles and register your car. You will obtain updated registration and fresh tags. If you bought the car with your money, a title will be sent to your address. If you took out a loan to buy your car, the title will be sent to your lender who will hold a lien on it. Contact your insurance company and explain that you are keeping your leased vehicle. Update your insurance to reflect your current coverage needs.

Leasing Considerations

If you want to buy out your lease before the end of the lease term, that may not be a good idea advises Dr. Don Taylor writing for Bankrate.com. Consumers can find themselves upside down with a leased car, owing more on it than it is worth. Instead Taylor advises that you should wait until the end of the lease to exercise your buy option.

See Also — How to Prep Company Cars for Employees