Vehicle title lien
Also known as: Car lien · Lienholder on title · Auto lien · Security interest in a vehicle
The lender's security interest in a financed vehicle, recorded on the state certificate of title, which lets it repossess the car on default and keeps the title from transferring cleanly until the loan is paid.
Legal basis
UCC §9-311 (perfection of security interests in property subject to certificate-of-title statutes)
When a car is financed, the buyer owns it but the lender holds a security interest under UCC Article 9. For titled goods, the filing of a financing statement does not perfect that interest; state certificate-of-title statutes do, by listing the lender as lienholder on the title (UCC §9-311). The lien stays until the loan is paid and the lender releases it.
The lien is what gives the lender its remedy. On default it may repossess the vehicle, sell it and apply the proceeds to the debt, with the borrower liable for any deficiency — the rules that make auto credit cheaper than unsecured credit.
But the lien is a record, and the car moves. Between origination and default, the vehicle can be driven far more than declared, cross state lines, be passed to someone else or be stripped for parts. Monitoring the collateral continuously — not only filing the lien — is what keeps its value recoverable.
Frequently asked questions
Can you sell a car that has a lien on the title?
Yes, but the lien has to be paid off and released before the buyer gets a clean title. In practice the sale proceeds pay off the lender, who then releases the lien so the title can be transferred.