Automotive

Need Advice: Used Car with Lien

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  • Apr 5th, 2008 11:00 am
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Jun 3, 2004
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Need Advice: Used Car with Lien

I'm interested in a used car but it has a big lien on it owed to the bank. The seller's looking to sell off the car to pay off that lien. Since the guy doesn't have the money to pay for the lien, he was hoping to get the money first to pay off the car before ownership could be transferred and obviously that doesn't sit well with me. Does the lien have to be cleared before the car can be sold? Any advice on other options in dealing with this?
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realchinshady wrote:
Apr 4th, 2008 12:04 am
I'm interested in a used car but it has a big lien on it owed to the bank. The seller's looking to sell off the car to pay off that lien. Since the guy doesn't have the money to pay for the lien, he was hoping to get the money first to pay off the car before ownership could be transferred and obviously that doesn't sit well with me. Does the lien have to be cleared before the car can be sold? Any advice on other options in dealing with this?
Meet at the bank, give the money directly to pay off the car.
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^^Yep, that's pretty much the best way to do this.

I'm actually in the process of doing this myself. I have an '08 Lancer that I'm selling. Just bought it in December but have to get rid of it (buying a house). I still owe quite a lot on it. I've told my potential buyers that they have to meet me at the bank that I financed my car with should they decide to go ahead with the purchase. That way, they witness that the lien is paid off ASAP.
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gill2k wrote:
Apr 4th, 2008 1:58 am
^^Yep, that's pretty much the best way to do this.

I'm actually in the process of doing this myself. I have an '08 Lancer that I'm selling. Just bought it in December but have to get rid of it (buying a house). I still owe quite a lot on it. I've told my potential buyers that they have to meet me at the bank that I financed my car with should they decide to go ahead with the purchase. That way, they witness that the lien is paid off ASAP.
So what about the bill of sale then that comes with the UVIP? Is it ok to use the same one that shows the lien on it if it's been paid off at the bank?
What's the exact process of this? Go to bank with seller to pay off lien and then go to MTO with the bill of sale to transfer ownership?
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realchinshady wrote:
Apr 4th, 2008 2:07 am
So what about the bill of sale then that comes with the UVIP? Is it ok to use the same one that shows the lien on it if it's been paid off at the bank?
What's the exact process of this? Go to bank with seller to pay off lien and then go to MTO with the bill of sale to transfer ownership?
That's pretty much the gist of it (at least here in Manitoba). Pay off lien with buyer/seller at the bank, sign the back of the Autopac (only car insurance/registration available in Manitoba) registration card to transfer ownership. Give ownership card and bill of sale to buyer and they'll re-register it with Autopac under their name.

IIRC, as long as your registration office sees there's no lien on the car, ownership transfer should be no hassle. It would help too if you could get a copy of the receipt from the bank showing when the lien was paid off.
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realchinshady wrote:
Apr 4th, 2008 2:07 am
So what about the bill of sale then that comes with the UVIP? Is it ok to use the same one that shows the lien on it if it's been paid off at the bank?
What's the exact process of this? Go to bank with seller to pay off lien and then go to MTO with the bill of sale to transfer ownership?
I assume the bank would give some kind of letter saying that the loan has been paid back...

Or is the MTO willing to register vehicles with outstanding liens in the PPSA registry if the buyer knows the legal risks?
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I would stay away from this....it has all the red flags to make it a terrible deal.

Then you'll be posting to find out how to fix this problem you got yourself into
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Grassgreen wrote:
Apr 4th, 2008 4:19 pm
I would stay away from this....it has all the red flags to make it a terrible deal.

Then you'll be posting to find out how to fix this problem you got yourself into
It's not a terrible deal as long as the buyer and seller can coordinate paying off the lien at the time of purchase.

I mean, for example, in my situation, I owe $28K on my car. I have a buyer who wants to buy it for $25K. How hard would it be to have my buyer give me a $25K bank draft or cash and I cover the $3K difference RIGHT AT THE BANK that I financed my car through? I probably won't even touch that $25K since they'll hand it straight to whichever bank personnel we deal with at that time. If it's a bank draft or cheque, it won't even be under my name. Get two copies of a receipt, one for me, one for my buyer, stating that the lien was paid off on that day. Hand over transfer of ownership and bill of sale. Done deal.
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Sep 4, 2007
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Grassgreen wrote:
Apr 4th, 2008 4:19 pm
I would stay away from this....it has all the red flags to make it a terrible deal.

Then you'll be posting to find out how to fix this problem you got yourself into
It's actually not that terrible of a deal.

A friend is looking to sell his car with a lien, which is financed through GM. If he finds a willing buyer, the two of them go to a GM dealer and the dealer sorts it all out. No big deal.

OP, if you're interested in going through with this deal, perhaps consider having the financials taken care of through the dealer, if financing was arranged through them.
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HBP wrote:
Apr 4th, 2008 1:01 am
Meet at the bank, give the money directly to pay off the car.
And make sure the Bank provides you with a letter of lien release before you leave.
supersnazz wrote:
Apr 4th, 2008 6:11 pm
It's actually not that terrible of a deal.
It is a very common thing to do it this way, just make sure that the entire lien is paid for at the time of the transaction...

And get a UVIP to make sure there is only one lien on the vehicle.
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Thanks for the help guys!
I have already gotten the UVIP for the vehicle and it only shows one lien and it's with the bank. With the bill of sale, after it's filled out, does the seller have to go with me to MTO when it's handed in or do I just do everything else on my own after the lien's been taken care of? I have to get it safetied and insured before I can drive it too right? Is there a temporary permit for something like that? It's going to be my first car purchase so I just want to make sure I don't get screwed over. This guy also lives over an hour away so I want to plan this out right so I won't have to take too much time away from work.
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Dec 26, 2006
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Sorry to cut in and have a stupid question, what bad legal things can happen if I didn't know the complications and bought a car with lien, drove it for a few years and gave it to the junkyard?
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homeless06 wrote:
Apr 4th, 2008 11:01 pm
Sorry to cut in and have a stupid question, what bad legal things can happen if I didn't know the complications and bought a car with lien, drove it for a few years and gave it to the junkyard?
Go read the Personal Property Security Act (the Ontario version is at http://www.e-laws.gov.on.ca/html/statut ... .htm#BK40). Or attempt to, anyways, as it's a fairly cryptic thing...

IIRC, if the secured party (the party holding the security interest - security interest is just the "modern" term for liens and other such things) has their paperwork right, then if the creditor (the person you bought from, presumably) defaults on the loan, they're entitled to seize the car from you and give you nothing in return.
That's the danger of buying goods with outstanding security interests from sellers outside the ordinary course of their business: presumably they can take your cash and go missing with it, then you're stuck when the goods are repossessed.

Of course, it goes without saying that you should never rely on a forum poster's interpretation of the law - if you were to actually consider doing this, you want to get legal advice from a lawyer experienced in the intricacies of the PPSA. Or just avoid buying things with outstanding security interests...
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Dec 26, 2006
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Is that cryptic thing in English? I hardly understand anything at all ...

Anyways, back to the question .... if I drove that car for only a few years and gave it to a junkyard because it was too old .... after that, am I still hold accountable for whatever loans from the car lien from the previous car owner? (in other words, can the creditor go after me ??)
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homeless06 wrote:
Apr 5th, 2008 7:05 am
Is that cryptic thing in English? I hardly understand anything at all ...
There's a reason that that piece of legislation requires a whole law school course... and even then, there's a limit to how much can be covered in 12 weeks :) There are entire books about the PPSA, too.

It's not actually that bad once you understand some of the key concepts, e.g. collateral, security agreement, perfection, security interest, proceeds, transfer in the ordinary course of business, etc. But it's not something that can be explained in a forum post or two...
homeless06 wrote:
Apr 5th, 2008 7:05 am
Anyways, back to the question .... if I drove that car for only a few years and gave it to a junkyard because it was too old .... after that, am I still hold accountable for whatever loans from the car lien from the previous car owner? (in other words, can the creditor go after me ??)
Hmmmmm... that's a question to ask a lawyer who has experience with the PPSA. :)

Keep in mind one principle: this is about collateral, not loans. e.g. Let's say you buy a car from me with an outstanding security interest. $15K is still owed; I default on the loan. The creditor is entitled to seize the collateral - whether or not it's in my possession or yours (unless the PPSA says you can keep it). But once they seize the car from your driveway... that should be the end of the matter as far as you're concerned. Even if the car is worth only $10K, the missing $5K is between ME and the creditor, not you.

I would hazard to guess that this reasoning makes fairly clear what happens if the original purchaser no longer has the collateral in his/her possession, but there could be all kinds of other factors involved as well. This is an area of the law with tons of strange quirky technical requirements. There's a reason only properly-licensed lawyers, not dudes on forums, can give legal advice.

Bottom line: unless you want to pay big $$$$$$$ in legal fees, steer clear of buying cars from private sellers if somebody has a security interest against the car.
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