Selling a Car With a Lien in Canada: Is It Legal?


If you’re considering selling a used car in Canada but there’s still a lien registered against it, you might wonder whether it’s even legal to proceed with the sale. The good news is that selling a car with a lien is legal—however, certain conditions must be met. Failing to follow the proper steps can lead to legal complications, delays in title transfer, or financial loss for both the seller and the buyer.

Whether you’re planning a private sale or trading in your vehicle, it’s crucial to understand how liens work and what obligations you have as the seller. For the buyer, using a Canada lien search tool is one of the most effective ways to confirm the lien status of a vehicle before listing it or finalizing a transaction.

This guide covers what a vehicle lien is, whether you can legally sell a car with one attached, and how to handle the sale process correctly to protect both parties.e to add your own text.

What Is a Lien on a Vehicle?

A lien is a legal claim placed on a vehicle by a creditor—usually a lender, repair shop, or storage facility—until a debt is paid off. The most common type is a financing lien, where the lender retains a financial interest in the car until the loan is fully paid.

Other types of liens include:

  • Mechanic’s lien: For unpaid repair bills
  • Storage lien: For vehicles left unpaid in impound or storage lots

If a car has an active lien, the registered owner does not fully own the vehicle. That means the lienholder has a legal right to claim or repossess the vehicle if the debt isn’t settled.

Legality of Selling a Car With a Lien in Canada

Yes, it is legal to sell a car with a lien—but only if you follow the proper process. Each Canadian province may vary slightly, but the legal foundation is the same: you must disclose the lien, and it must be paid off before or during the sale for the title to transfer cleanly.

Failing to disclose a lien to a buyer can result in legal action, and in some cases, the buyer may lose the vehicle if the lienholder repossesses it.

Bottom line: Transparency is essential. Selling a car with an undisclosed lien is not only unethical—it can also be illegal under consumer protection laws.

Why Lien Disclosure Matters for Buyers

Buyers who unknowingly purchase a vehicle with an active lien face serious consequences. The lender could repossess the vehicle, leaving the buyer without the car or their money.

In British Columbia, private vehicle sales are common—especially in cities like Vancouver and Victoria. If you’re selling a car with an existing loan or lien, buyers may ask for proof that the lien is cleared. To keep the transaction smooth and legally sound, it’s a good idea to run a British Columbia lien check and provide the buyer with confirmation before finalizing the deal.

That’s why many buyers are encouraged to run a lien search before completing any private vehicle purchase. It helps ensure the car has a clean title and no outstanding financial claims.

For sellers, full disclosure and proper handling of the lien protects your reputation and prevents future legal complications.

How to Sell a Car That Has an Active Lien

If you’re selling a car that still has an outstanding loan or lien, follow these steps to do it safely and legally:

  1. Contact your lender: Request the current loan payoff amount (also called a lien discharge amount).
  2. Disclose the lien to the buyer: Be upfront that the vehicle has an active lien.
  3. Arrange payment through the lender: Either:
    • You pay off the lien before the sale
    • Or the buyer pays the lender directly and the balance (if any) goes to you
  4. Obtain a lien release letter: Once the debt is paid, get official confirmation from the lienholder.
  5. Transfer ownership: With proof that the lien is cleared, complete the title transfer at your local registry.

Meeting at the lender’s office or registry is a good practice—it allows both parties to confirm everything is handled properly in real time.

Final Thoughts: Sell the Right Way With Transparency

Yes, selling a car with a lien in Canada is legal—but only if you’re transparent and handle the debt properly. The lien must be paid off before or during the sale, and you must clearly inform the buyer of its existence.

You can legally sell a car with a lien—but hiding it risks legal consequences, damages your credibility, and may lead to the deal falling apart.

Don’t risk legal trouble or a failed sale. If you’re planning to sell or buy a car with a lien, use a trusted source line VinAudit Canada to verify the vehicle’s status and ensure peace of mind for both parties.