Buying a car with a privilege – Forbes Advisor


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One of the best ways to save money on a car is to buy a used vehicle. It is possible to save even more money by purchasing a used car directly from its previous owner, rather than going to a dealership. But it also presents a chance that the seller will still reimburse the car, which means that there is a lien on the vehicle.

While it is true that buying a privileged car involves a few extra steps compared to a non-privileged vehicle, it is still possible to do so. Here’s what you need to know.

What is a privilege?

A lien is a claim that another person called the lienholder (who is usually a lender) has on a car. If the person you are buying a car from still has a car loan, that car will have a lien on them. In this case, the lender will hold title to the vehicle and release it once the loan is paid off.

A lien allows the lender to repossess the vehicle if the loan is not paid, regardless of who currently holds the keys. This is why it is important to make sure that the lien is waived when you purchase the vehicle.

How to check if the car has a lien

You can ask the person selling the car if they are still paying off the loan or if they have a lien on it. But it’s also a good idea to check it with another method. Fortunately, it is relatively easy to find out.

Check with your state’s online VIN tool

The best way to check if the car you want to buy has a lien is to use your state’s motor vehicle department. Each state has an online VIN checker, or you can at least contact the department directly.

You will need to ask the seller for the vehicle’s VIN in order to get this information from your state. You can also find the VIN written in a few places on the car, such as in front of the steering wheel on the driver’s side dashboard, and inside the driver’s side door, the driver’s side door pillar and the rear wheel arch.

How to buy a car with a lien

It can be a little scary at first to learn that the car you want to buy has a lien. But it’s actually quite common to find a lien attached to a vehicle if you buy it from a private seller. After all, auto loans are getting longer and longer, which increases the chances that someone will pay it off when they want to sell it.

Talk to everyone involved in the transaction

It is important to maintain open lines of communication between you, your lender, the seller, and the seller’s lender. There are different ways of handling the purchase of a privileged car from an individual, depending on who is able to do what. But in order to find the best option for everyone, you will need to communicate with all parties.

Asking the seller to repay their loan

The easiest way to buy a used car with a lien is to ask the seller to pay off their loan, if they are able to. If they have money saved, they can do it, or they can take out a personal loan or a home equity loan to pay off the car loan. They can then use the funds from the sale of the car to pay off the new loan they have taken out. This releases the title and removes the privilege for you.

However, not everyone is able to do this, either because they don’t have the money or because they can’t get financing to pay off their car loan. Still, it’s worth talking about to see if that’s an option.

Ask the lender to transfer the title

As soon as you know you want a used car loan, it’s a good idea to contact your lender and ask what their policies are in case the car you want to buy has a lien. Often your lender will be able to work directly with the seller’s lender to complete the transaction and deliver the transfer of title without lien.

In this case, your lender will pay either the seller or the seller’s lender. If the seller’s lender is paid, any additional funds beyond what he needs to repay the loan will be returned to the seller. If the sale price is less than what the seller owes, the seller will still have to make payments until the loan is paid off, even if he no longer owns the car.

Use an escrow service

If the seller can’t repay the loan on their own, and the lenders are unwilling to work together, you could find yourself in a bind. You can’t return your money because you won’t be able to get the title, and the seller cannot return the title because then they can’t pay off their loan.

Escrow services, similar to the home buying process, solve this problem by allowing you and the seller to place your respective parts of the deal (the title of the car and the money) to a separate account controlled by a trusted escrow service. When the money and title are verified, the escrow service releases it to you.

You will need to be careful here, however, as escrow services are frequently used in auto sales scams. If you use an escrow service, it is better to use them for local in-person purchases rather than buying a car online, according to consumer protection groups.

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