Before buying a car (especially a used one from a private seller), it’s important to check if the car has a lien.
A lien means that a lender has a legal claim on your vehicle because a loan remains outstanding. By conducting a lien search on the title, you can discover any existing liens and avoid potential ownership and financial issues.
Let’s go into further details about car liens and how to check if a vehicle you’re buying has a lien on it.
Key Points
- A car lien someone has a legal interest on a car, meaning itis used as collateral until the debt is fully repaid.
- Lenders, mechanics, garages, and courts may place a lien on a car title.
- Dealerships are not allowed to sell a car with a lien on it, though unscrupulous private used car sellers may still try to sell a vehicle with a lien.
- If you buy a car with a lien, you’ll need to pay off the debt to release the lien, otherwise, you could face repossession and legal consequences.
What Is A Car Lien?
A lien on a car is a legal interest that a lender has on a vehicle as collateral for a car loan. If the borrower fails to make loan payments, the lender has the right to repossess the vehicle.
Until the loan is fully repaid, the lien stays in place. Once the loan is paid off, the lender releases the lien, and the borrower assumes outright ownership of the vehicle.
Note: A car can have more than one lien on it from multiple parties.
What Types Of Liens Can Be On A Car Title?
Two common types of liens may be found on a vehicle’s title:
- Financing Lien. If a vehicle is financed, the lienholder (lender) retains ownership of the vehicle until the loan is paid off.
- Judgment Lien. If the owner of a vehicle has unpaid debts, a court may place a lien on the car as collateral for the amount owed.
- Mechanic’s Lien. A garagekeepers’ lien or mechanic lien can be placed on a vehicle if the owner doesn’t pay for work done on the car.
How To Check If Your Car Has A Lien On It In Canada
Here are a few ways to check if there is a lien on the title of a vehicle you wish to purchase:
Use The Property Registration By Province
Each provincial and territorial government has its own personal property security search resource for used cars. Keep in mind that a vehicle can be registered in multiple provinces or territories.
While some regions require private sellers to inform prospective buyers about car liens, there’s no guarantee that they’ll actually do it, so it’s always a smart idea to check the vehicle’s history for liens yourself before you buy it.
Check The Car History Report
To confirm whether a car has a lien against it, you can check the vehicle history report.
A car history report provides a detailed record of a vehicle’s past, including information about liens. It also includes information about past accidents, previous owners, mileage, and maintenance or repairs. This can help you more accurately assess the condition and reliability of a used vehicle before purchasing it.
One of these searches can help you access information, such as the:
- Name and address of the lender who holds the lien
- Name and address of the seller/debtor
- Agency that the debt/lien is registered to
- Type of collateral associated with the lien (classification)
- Details of business debtors (name, full address, corporation number)
Can You Get A Vehicle’s History Report For Free?
While most trustworthy dealerships and online retailers offer free vehicle history reports for used cars, many private sellers don’t want to pay for this service.
Since this is one of the only real ways to tell if a car has a lien on it, you should just buy and download the vehicle history report yourself. Despite the costs, the peace of mind you receive afterward is worth the cost.
| Note: Liens may not always be listed on the vehicle history report. You might need to opt for a specialized plan — typically with an additional fee — to uncover them. It’s recommended to verify the lien status by consulting your provincial or territorial registry for accuracy. |
Providers That Offer Vehicle History Reports With Lien Checks
| Description | |
| Carfax Canada | Offers free VIN checks, as well as some of the most comprehensive vehicle history reports available. At the moment, it costs $54.95 for a basic vehicle history report and VIN check, and $69.95 with a lien check. |
| VinAudit Canada | This company that also offers free VIN checks. It’s $14.95 for a car history report, which includes manufacturer buybacks via the Canadian Motor Vehicle Arbitration Plan (CAMVAP), recall record and more. |
Ask The Seller For Information About The Liens
If you’re buying from a private seller, ideally, they’ll be forthcoming about any liens on the title, and if there are, hopefully, they would be willing to cover the full cost of their lien before selling it.
If the seller claims to have gotten rid of the lien, ask them for a lien release letter from their lender. This document proves that the debt has been settled, and the lender no longer has a claim to the vehicle.
Use A Notary Or Title Company
Many title companies and notaries can check for liens for you for a fee. If you’re financing the purchase of the car, the lender may also confirm whether the title is clear.
Vehicle Identification Number (VIN) Decoder Versus Vehicle History Report
A VIN is a 17-digit number that is typically found on the windshield (driver’s side) or the driver’s side door jamb, as well as on the car’s service, ownership, and insurance papers.
- The VIN when decoded can tell you the vehicle’s model year, type, engine, trim, and vehicle’s manufacturer. This can help you ensure that the vehicle history report matches the vehicle you’re looking to buy
- A vehicle history report is a more extensive look at a car’s background, including if a car has a lien on it. A VIN is typically required to access the vehicle history report.
| Note: A VIN decoder does not tell you whether a car title has a lien on it. You’ll need to check the vehicle history report (in some cases you may need to specifically request a lien check), which may come with an added cost. |
Reasons You Should Check For A Lien On Your Car
Why is it so important to check if your vehicle has a lien registered against it before you purchase it? Here are a few reasons:
You May Be Responsible For The Previous Owner’s Debt
When you find a “good deal” through a private sale, it’s tempting to buy the car without checking its history first. However, just because the car changes ownership, it doesn’t mean a lien will automatically disappear. Once the car’s title is signed over, you’ll become its owner and may be responsible for any remaining debt.
Unpaid Car Liens May Lead To Repossession
Unfortunately, not all sellers are trustworthy, and if there are one or more liens on your car, you’ll probably have to take over the payments if you want to keep it. Otherwise, as the party with controlling interest, the issuer of the lien is allowed to repossess and resell the car to recover what’s owed to them. Then, not only will you have no car, but the repossession may appear on your credit history and damage your credit score.
Learn more: Can You Get Your Car Back After Repossession?
Penalties, Interest & Lower Creditworthiness
If you don’t pay back the debt or there are already missed payments on the car, you have to cover any interest or penalties that have accumulated too, which can lead to financial turmoil. Like a repossession, those missed payments will also harm your credit.
When you apply for new credit in the future, lenders may see these black marks when inspecting your credit. This may result in rejection, lower credit amounts and higher interest rates charged.
It should be noted that these scenarios may be more likely when buying a car from a private seller. In Canada, dealerships are required to discharge all liens before selling a used car.
What To Do If You Buy A Car That Has A Lien On It?
If you discover an active lien on the car, follow these steps:
Step 1: Understand The Legality Of Buying A Car With A Clean Title
Whether the seller of a vehicle is required to provide a clear title depends on who you’re buying the car from. It’s important to understand the legalities surrounding liens on title in terms of transferring ownership.
- Buying From A Dealership. Car dealerships are legally required to clear any liens on title before they sell a vehicle. As such, it’s their responsibility to pay off the debt. For instance, in Ontario, registered dealerships with the Ontario Motor Vehicles Industry Council (OMVIC) are not allowed to sell a vehicle with a lien on it. If you unknowingly bought a car with a lien on it from an OMVIC registered dealer, you’d be eligible for a refund through the OMVIC’s compensation fund.
- Buying From A Private Seller. In certain provinces and territories, private sellers are required to disclose information about any existing liens before transferring ownership of the vehicle to you. However, as always, buyers beware.
Step 2: Pay Off Debt
Settle the outstanding balance with the lender. Reach out to the lender to find out exactly how much needs to be repaid and make sure it’s paid off in full. Ideally, the seller will cover this cost.
Step 3: Request A Lien Release Letter
Ask the lienholder to provide you with a written document stating the loan is fully repaid and that the lien has been released.
Step 4: Submit The Lien Release To Registry Office
Provide the lien release document to the provincial registry office so they can update the title.
Step 5: Receive A Clear Title
Once processed, the vehicle’s title will be updated, and you’ll receive a new title without the lienholder’s name. In turn, you’ll own the car free and clear.
Final Thoughts
Discovering an unpaid lien on your car can be a significant and expensive hassle. For this reason, it’s a good idea to get a full VIN check and vehicle history report to verify the existence of a lien before purchasing a vehicle. Contact your local traffic authorities for more information about the regulations and requirements for car lien checks in your province or territory.
