If you are in the market for a cheap vehicle, then buying a used one is your best option. To make it even more cost-effective, you should consider buying directly from a car owner rather than a dealership in order to avoid the extra charge that the dealership would add to secure its profit margin. However, this comes with its own challenges such as any auto-loan that may still be in effect for the car you plan to purchase.
Cars that were bought with a loan also usually have a lien in place. This is a contract that gives the lender the right of ownership of the vehicle in the case that the loan applicant is unable to pay off the loan. If you are buying a used car that has such a loan attached, then you also need to consider the lien that it may have. Here is what you need to do to successfully transfer a vehicle with a lien to your name.
- Find Out About the Lien
Some honest vehicle owners are transparent about the situation and will tell you that there is a lien in place. Others are not that clear about the situation and are more interested in selling the vehicle as quickly as possible. There are multiple ways to check the lien status on any given vehicle. The easiest and quickest method is to check online through the local DMV portal. All you will need for this is the vehicle’s VIN number. Put that number into the DMV database and you will get all the information you need about that particular vehicle.
- Contact Involved Parties
If the vehicle does have a lien, then get in touch with the involved parties. This will include contacting your loan provider, the seller, and the seller’s loan provider. If you are buying the car through an intermediary then also make sure the person/company conducting the lien sale is up to speed with all the happenings. Keep yourself in the loop regarding all communication, and make sure everyone involved in the transaction knows what is going on at every stage of the purchase.
- Have the Loan Sorted Out
The ideal scenario is that the seller sorts out the car loan and then proceeds with the sale. You can suggest that the seller take a small personal loan or maybe a loan against their property to pay off the car loan. Then when they receive the proceeds from the car sale they can pay off the loan they took to pay the car loan. This simplifies the process for yourself and the seller and also means you get a car with no strings attached.
- Evaluate the Vehicle
Before you decide on the vehicle you’ll purchase, make sure you get it properly evaluated. There are a number of companies that provide car inspection services, or you could talk to your mechanic to help you with an evaluation. At this stage, you are just looking to make sure that the vehicle is mechanically sound. You should also look at the history of the vehicle which is available at the DMV to make sure it hasn’t been involved in any major accidents or had any other problems.
- Transfer the Title
Once you are confident that this vehicle is right for you, it is time to finalize how you are going to carry out the transaction. The best option is to get your lender to talk to the sellers’ lender and finalize a deal. This way, you don’t have to worry about whether you’re paying the right amount, and the seller also gets a fair price for their vehicle. If the value of the vehicle is more than what the seller currently owes, their lender will settle the difference. If the value is less than what they owe, then they will still be liable for that amount even after the vehicle has been transferred out of their name.
- Use an Escrow Service
If the lenders aren’t willing to work together, then you will have to settle the deal with the seller directly. However, the seller can’t sell the car with an active lien on the title. The best option is then to hire a third-party escrow service. You will put your money into the escrow service and the seller will put the car title into the same service. When everything is verified by the Escrow service, the deal is then finalized.
Buying a car with a lien is not that big of a problem if you know how to deal with it properly. You can get an excellent vehicle at a great price simply by knowing how to handle a lien issue. Ideally, you should try and do it through your lenders, but if that isn’t possible, there are still other solutions. Ensure you have the vehicle inspected prior to finalizing your purchase.