Can You Trade in a Car with a Lien?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - February 14, 2018

Liens are a legal document that put a vehicle’s title under someone other than the borrower’s name. The lienholder can be a lender, bank, or any other third party, and they ultimately own the vehicle until the borrower pays off the loan. But, what if a borrower decides they want to trade in their vehicle with a lien on the title?

It’s Possible, but…

With a lien still on the title, the vehicle isn’t legally allowed to be sold to a dealership or a private party. In other words, the seller needs to figure out how to get the lien removed before making a sale.

Dealer vs. Private Seller

There are two different paths a buyer can take to sell the vehicle: they can go to the dealer or sell it themselves as a private seller. Both are viable options, but the lien will be dealt with differently depending on the route they take.

Dealer – When a borrower goes through a dealership to either sell or trade in their vehicle, the dealer handles all the paperwork and pays off the lender. Once the lender has its money, it will send a release of lien letter to the dealer.

Private seller – In order to get the lien removed, the borrower will need to go directly to the lender to pay off the loan. Although this option can be more time consuming, as is typically the case when selling a vehicle, the borrower can often get a higher price with a private seller than what a dealer would offer.

Both options can help a borrower who has a lien on their car successfully sell their vehicle. It’s a matter of what will work best for them: going to a dealer or selling the vehicle privately.

Bottom Line

A lien needs to be removed before you can sell your vehicle. Until it is, you can’t legally sell to a dealer or a private party, so make sure you know what to do before starting the process.

If you find yourself in a bad credit situation and need an auto loan, CarsDirect may be able to help. We work with one of the nation’s largest networks of special finance car dealers who have the lending resources available to work with people in unique credit situations. Get started by filling out our free online auto loan request form today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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