When you’re shopping for a used car, it’s important that you check the vehicle for an outstanding lien. Statistically, it’s pretty common for a car to have a lien – 45 percent of vehicles searched in Canada have a lien registered against them – and if you don’t know about a lien before you buy, you could be on the hook for the consequences. To help you make an informed decision when you’re buying a used car, we’ve outlined what a lien actually is and why it matters to you.
What is a lien?
A car 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 bank, your vehicle will likely have a lien registered against it by the bank. 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.
Why is it important to know about liens?
As a buyer, you may be responsible for any unpaid debt (the amount of the lien) registered against a used vehicle that you buy. If you find out that the lien was not paid off on a car you now own, then the secured party may be able to repossess the car from you. That is why it is critical to know whether there are any liens registered against the vehicle you are purchasing – information that a CARFAX Canada Verified report or Lien Check can help you determine.
What lien information is available on a CARFAX Canada report?
If we discover there is a lien registered against the vehicle, we will identify this in the report, and provide (to the extent this information is made available to us):
- The name and address of the person who owes the money (individual debtor)
- If a business owes the money, the package will have the business debtor’s name, the corporation number, and the full street address
- The name and address of the lender (the secured party)
- The place where the debt is registered (registering agent)
- The collateral classification (vehicle)
Don’t be afraid to ask questions about the specifics of the loan from both the seller and the secured party. As the buyer, it is your responsibility to get all the necessary information you need to buy a used car with confidence.