Buying a Car with Lien Ontario
Buying a Used Car Ontario: Lien. You are in the market for a “new” used car in Toronto and just found a perfect one, in good condition with all bells and whistles. Price looks enticing too. Its all good except one small dangerous detail you never thought about: A Lien
Vast majority of cars on the road in Ontario under 3 years of age are financed ( with a lien on title). Cars are under monthly payments for years until full amount has been paid and lien cleared. Or to put it another way, owners do not own their cars, at least not 100% until they completely finish payments.
Can you sell a car with a Lien on title in Ontario?
Simple answer is, Yes. In Ontario people can legally sell a car privately with liens on title. However, dealers are prohibited to sell a car with liens on title to their customers.
Ontario UVIP helps identify a registered lien against a car. To sell a car you need to provide a UVIP or Ontario Used Vehicle Information Package to transfer ownership registration to a new owner. UVIP will indicate if a vehicle has liens against it or not (either One Liens registered or 0 liens registered). More details on UVIP.
So what happens if you buy a car in Ontario from a private seller with lien on title without your knowledge? Well, there is a chance you will lose the car to repossession and have to sue seller to get your money back.
What happens if you buy a car with a lien on title?
Simply put, Lienholder is rightful owner of a car until original car loan amount is paid in full. A Lienholder can be a Bank, Credit Union or other Financial Entity. Lienholder does not care about ownership transfers or how many times car was sold and bought. Law says is their car until car loan is fully paid. Regardless of how many owners car has changed. Lienholder will reposes the car if monthly payments are stopped.
Example: Assume a car was purchased new for $35,000, with zero down-payment and 7 years financing. It will amount ballpark at about $450 per month for 7 years. “Owner” keeps it for a year and then sell it privately to someone else. Lets say sold it for $25,000, without disclosing car has a lien and is under financing.
Seller paid $450 for 12 months, a little over $5,000 and has very little equity in their vehicle. There is still $30,000 to be paid in monthly installments. They sold the car and received $25,000 in cash from a buyer.
Buyer now has the car, but unbeknownst to him car has a lien on title and $30,000 remaining loan. Buyer is now relying on sellers honesty to pay $450 per month for another 6 years until car loans clears.
If seller stops monthly payments, Lienholder will reposes and buyer will lose their car to repossession.
Chances are very low that anyone will keep paying monthly loan installments for another 6 years on a car they already sold. There are a hundred reasons why a seller will stop loan payments after selling their car. Losing their job, divorce, health problems, leaving country permanently, bankruptcy, just to name a few.
Who owns a car with a Lien in Ontario?
Regardless of how many owners a car changes, will always belong to first Lienholder who released original loan. They will reposes if monthly payments are stopped. Once they reposes, it can’t be fought, law is on their side.
Only thing one can do is to contact person who sold them the car and try to get their money back, or sue in small court. It is unlikely to get your money back easily in these cases.
More on Things to Check When buying a Car.
How to avoid buying a used car with Lien on title in Ontario?
You need to buy a UVIP (Used Vehicle Information Package), costs about $30 and is obligatory when selling or buying a car.
UVIP is sold at Ministry Of Transportation locations and has a section which shows liens registered against a car. If there is a lien will show “Registered Lien on this Vehicle”. Otherwise will just say “No Liens” or “Zero Liens”.
Another way to check for liens registered on a used car title in Ontario is Carfax. Purchase Carfax online. Carfax will set you back 40 bucks but is worth it as will show detailed accident history too.
Never buy a used car in Ontario unless you check and make sure there is no lien registered against the car. Its one of the worst things to deal with. An engine can always be fixed but a Lien can’t be fixed…unless you are willing to pay for your car twice.
Things you need to check when buying a used car:
– How to Negotiate When Buying a Used Car
– What to Check When Buying a Used Car
Comments: If you have any questions or suggestions related to this post or Used Car Toronto in general, don’t hesitate to use comment section below.
