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What is a Lien on a Car? Guide For Dealerships
Do automobile dealerships need to know what is a lien on a car? Yes. You need to understand the answer to the question to save your dealership time and money.
At its core, an auto lien is a legal claim against the vehicle, typically held by the lender. It means that the named owner does not own the car outright and thus may not transfer its title. The vehicle is collateral for the auto loan.
We provide auto financing services for car dealers and can help! Read on to learn everything your dealerships need to know about car liens.
What Car Liens Mean for Car Dealerships
In answering the question, what is a lien on a car, it is helpful to understand that car liens can:
- Come in different types
- Be difficult to remove
- Lead to repossession
In addition, it is against the law to sell a car with a lien. Therefore, if your dealership purchased a used car with a lien, your only recourse might be to pay off the lien and pursue the seller for fraud.
Types of Liens On a Car
The first step in removing the lien is determining the type of lien on the automobile. The most common type of lien is a financing lien that exists because the seller has yet to repay the financing through error or due to a lag in paperwork.
While financing liens are the most common, they are hardly the only type. For example, a car may have a lien placed on it by operation of law, mechanics liens, or child support liens.
Law liens could arrive from civil judgments attached to the car against the seller. A mechanics lien indicates that someone serviced the vehicle and the seller failed to pay. Finally, child support liens show the seller is behind on child support, and a court ordered the car attached to the debt as collateral to pay off his delinquent support.
Whichever lien is attached, the result is the same - your dealership will only be able to obtain a clean title and sell the car once it has the lien removed.
You Will Have to Get the Car Lien Removed
The process of removing an auto lien is neither simple nor quick. Consider yourself fortunate if the lien is a financial lien that only exists through delay or error. Removing this type of lien from a title typically takes around 30 days from the final payment date. However, services are available to assist, potentially shortening the process.
If the lien is valid and exists for any other reason, most likely, the only way to remove it is to pay off the lien. This may include, among other things, a court or administrative order and legal fees. The lien removal process varies, so check with your local Department of Motor Vehicles.
Consequences a Dealership Faces When it Buys a Car with a Lien
The dealer cannot legally obtain a clean title from a car with a lien. Thus, it cannot sell the car. At this point, the automobile is a sunk cost.
However, the outstanding creditor can enforce the lien at any time through foreclosure or taking the collateral and selling it. Consequently, a car with a lien on a dealership’s lot is subject to repossession.
You may also be able to pursue the seller for fraud for selling a car with a lien.
Never Purchase a Car without Conducting a Lien Search
Several services can quickly confirm a clean title and prevent your dealership from purchasing a used car with a lien.
We specialize in growing your car dealership’s business at 1803 Capital. We make loan offers with loan terms that are amenable. Our fast approval process leaves customers satisfied throughout the life of the loan.
Contact us today at 866-890-2415 to learn more.
