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How to Clear a Lien Off a Used Car

A lien can be a game-changer when you’re buying or selling a used car.

Because a vehicle is such a large purchase, it is common for car buyers to borrow money from a lender to cover the cost of their purchase, or to use their vehicle as collateral for another financial arrangement. Even if ownership of a vehicle changes, any existing liens will remain attached to that vehicle until they are formally discharged.

Anyone trying to sell their used car quickly and with little hassle should consider clearing any existing car liens before they list the used vehicle for sale. Horror stories of people buying a car only to discover it has a lien as it’s being towed away are enough to scare used car buyers into being vigilant about the lien status of the vehicle they’re considering.

What is a car lien? How common are they?

A lien is an interest in the car that the owner grants to another party (such as a bank, financial institution, or other party), usually as security or collateral for a debt, until such debt has been discharged. As an example, if you own a vehicle and you finance all or some of that vehicle with a lender or financial institution, your vehicle will likely have a lien registered against it by the lender or financial institution. The vehicle is the bank’s “security” that you will pay back the money they loaned you. If you don’t pay it back, they could repossess the vehicle.

If a lender loans a car owner money to pay off the vehicle, the lender may then be granted partial ownership of the vehicle through that lien. Car liens are common – over 40 percent of vehicles searched by CARFAX Canada having an existing lien.

Checking for a car lien

The first step to clearing up a car lien is discovering it. While a dealership is legally required to clear off existing liens before selling a used car, you have to be more careful when buying or selling cars privately. CARFAX Canada Vehicle History Report + Lien Check will search for liens in every province or territory in Canada so long as the vehicle is currently registered and/or has been registered in the past.

If you’re interested in a used car and discover it has a lien, it doesn’t mean you shouldn’t close the deal, it just means an extra step in the process – clearing the lien before you buy.

Removing an existing car lien

CARFAX Canada can provide important information needed to help get a car lien removed. This includes the name and address of the debtor (individual or a business ), the lender’s contact information, registering agent and collateral classification. To clear the lien, the vehicle owner must first pay off the money owed on the car. The lender will provide a document stating that the lien has been discharged. Then, the record must be changed by the provincial body that governs transportation in your province – give them a call and they’ll walk you through the steps. As a buyer, you want documentation that the lien is closed/discharged and that the there is no longer an interest on that vehicle. (The secured party can provide the seller with this.)

Buying a car with the peace of mind that is lien-free removes a lot of the stress and uncertainty from the car buying process.