A clear auto title results from paying lienholders in full, having the liens released, and getting the state DMV or similar agency to remove the lienholder from the certificate of title. The title on a vehicle must be cleared before it can be sold, but paying a off a lienholder also may be required to avoid having the car put up for sale at auction. The process and timeline of removing a lienholder and clearing a certificate of title depends on the reason for the lien.
When a vehicle is financed, the lender becomes a lienholder on the title. This gives the lending institution a security interest in the vehicle to ensure it cannot be sold and transferred to a new owner before the loan is paid in full. Lenders protect their interest in each vehicle in two ways; they retain possession of the title until the loan is vacated and place the lien on record with the DMV in the vehicle's state of registration.
Lenders can be cleared from the title when all scheduled payments on the loan have been satisfied, or when a borrower pays off the entire balance with a lump sum. Prior to paying a lump sum, the buyer should contact the lender to determine the payoff amount. Once this payment is received, the lending institution will mail either a “Notice of Recorded Lien” or a letter that releases the lien to the owner of the vehicle. The certificate of title showing the lender as the lienholder also will be mailed to the vehicle owner. To remove the lienholder, the vehicle owner can take or mail these documents to the DMV, which will print and mail out a clear title.
Garagekeeper’s and mechanic’s liens can be placed on a vehicle title when work that has been approved by the owner goes unpaid for a period of time determined by each state. Storage liens generally work in the same manner and often are the result of unpaid balances on vehicles that have been towed to an impound facility. For example, the waiting period to place a lien in Tennessee and Maryland is 30 days. If the debt remains unpaid, the lien holder must provide notification to the owner of the intended action. After an elapsed time set by each state, the lien holder can sell the vehicle at auction to recover the unpaid balance.
Releasing all of these types of liens starts with the vehicle owner paying off the amount due in full, but the process of clearing the title is determined by each state. Florida, for example, coordinates the payment to the lien holder, the release of the lien, and sending notification clearing the title to the DMV through its county clerk’s offices. In California, the vehicle owner pays the lien holder directly in exchange for a form releasing the lien. The vehicle owner must present the lienholder’s release to the DMV, which clears the certificate of title on the vehicle.
