Ownership of a vehicle with a loan outstanding against it cannot be transferred to a new owner until the loan is paid off.
Most US states issue vehicle titles to a vehicle's lender when the vehicle has a loan against it. A handful of states issue vehicle titles to the vehicle's owner when the vehicle has a loan against it.
A loan against a vehicle is usually documented in ink in the lien section (a lien is evidence of a loan against a piece of property, like a vehicle) on the front of the vehicle's title.
If your vehicle has a lien recorded on the title, the vehicle can only be transferred to a new owner if:
- The lien release field on the vehicle’s title has been signed and stamped by an authorized representative of the entity listed on the title as the lienholder, or
- The title is accompanied by a lien release letter that has been signed and stamped by an authorized representative of the entity listed on the title as the lienholder.
If you are buying a vehicle that has a lien outstanding, understand that the seller will take your money, pay off the lender, and then deliver the vehicle's title to you at a later date.
Because you will be without a) the money and b) documentation of your ownership of the vehicle during this time, you should consider purchasing a vehicle with a lien outstanding only if you are reasonably confident that you can trust the seller.