Yes, you can place a lien on a car. A lien is a legal claim against a vehicle used as collateral for a debt, most commonly a car loan. The lienholder, typically a bank or credit union, holds the vehicle's title until the loan is fully repaid. This legal mechanism protects the lender's financial interest, preventing the borrower from selling or transferring ownership of the car without first settling the debt.
The process is straightforward when you finance a vehicle. The lender automatically files a lien with your state's Department of Motor Vehicles (DMV) or equivalent agency. This lien is recorded on the car's certificate of title, often indicated by the lender's name listed as the lienholder. The title is mailed directly to the lender, not you. Once the final payment is made, the lender will release the lien and send you the title, free and clear.
However, liens can also be placed for other reasons. A mechanic's lien can be filed by an auto repair shop if you fail to pay for services rendered. Similarly, a judgment lien can result from a court ruling against you in a lawsuit, where the car becomes an asset used to satisfy the debt.
| Lien Type | Commonly Filed By | Primary Reason | How it's Resolved |
|---|
| Voluntary/Consensual Lien | Bank, Credit Union, Finance Company | Vehicle loan/Financing | Loan is paid in full |
| Mechanic's/Artisan's Lien | Auto Repair Shop, Body Shop | Unpaid repair bills | Outstanding bill is paid |
| Judgment Lien | Creditor (via court order) | Lost lawsuit with unpaid damages | Court judgment is satisfied |
| Tax Lien | IRS or State Tax Agency | Unpaid federal or state taxes | Tax debt is paid or settled |
Before buying a used car, it is crucial to check for any outstanding liens. You can do this by obtaining a vehicle history report or, more reliably, by contacting the local DMV for a title search. Purchasing a car with an unpaid lien means the debt transfers with the vehicle, and you could lose the car if the creditor repossesses it to settle the original owner's debt.
