If you still owe money on your car, your lender is part of the sale. In California the lender is listed on the title as the lienholder, sometimes called the legal owner. The DMV’s procedures say the lienholder must release its interest when the car changes hands, unless the same lienholder is staying on for the new owner (DMV manual).

This guide explains how that release works, what the DMV does and doesn’t publish about it, and what to ask your lender. The rest of the sale follows the usual steps in our California selling checklist.

Can you sell a car that has a lien on the title?

Yes, but your lender signs off too. The DMV’s title page puts a loan payoff on the same line as a private sale: “Seller/lienholder signs title. Buyer submits to DMV.” (DMV title page). So the title needs your signature as the seller and a release from the lender before the buyer can submit it.

What the DMV’s pages don’t cover is the money side: how to get a payoff amount, how long a lender takes to release the lien, or how to close a sale while a loan is still open. Those answers come from your lender, so that’s where to start.

Start with your lender

Find out who holds the title

Look at your title. When money is owed on the vehicle, it shows the lienholder’s name and information (DMV: titles overview). If your lender has gone out of business, merged, changed its name or been acquired since you took out the loan, the DMV keeps a Financial Institution Locator listing institutions like that, so you can find out who to contact now.

Questions to ask before you agree a sale

  • What is the payoff amount, and how long is that figure good for?
  • How do you accept the payoff? Can a buyer or a dealership pay you directly?
  • Is my title on paper or electronic, and how will you release it?
  • How long does the release usually take once the loan is paid?
  • Do you need anything from me, such as a signed form?

Write the answers down. They help any buyer, private or dealership, understand how the sale will close, and they help you set a realistic date for handing over the car.

How the lender releases its interest

The DMV’s procedures give a lienholder two ways to release its interest on a paper California title: sign Line 2 of the title, or complete a Lien Satisfied/Legal Owner/Title Holder Release (REG 166) (DMV manual). Which applies depends on your vehicle and your title.

Newer vehicles: the title only

For a vehicle two model years old or newer, the lien can only be released on the Certificate of Title. The DMV’s procedures say a REG 166, or any other kind of lien release, isn’t accepted for these vehicles, and if a replacement title is needed, the lienholder must request it (REG 166; DMV manual).

When a REG 166 is used

A REG 166 must be notarized, unless an insurance company submits it to obtain a salvage certificate. It also can’t be used for a vehicle with a paperless title (REG 166).

Electronic titles

Your lender may hold the title electronically, through the DMV’s Electronic Lien and Title (ELT) program. The DMV says paper and electronic titles hold the same legal significance. When the lien is satisfied, the lender sends a lien satisfaction notification to the DMV, and the title is issued to the registered owner, or to a new lienholder if one is being added. The DMV’s ELT page also lists releasing the paper title to a dealer among the options (DMV ELT page).

Your part of the paperwork

Once you know how the lender will release its interest, your side looks like any other California sale:

  • Sign the title on Line 1 as the seller (DMV private-sale page).
  • Check for co-owners. If the names are joined by “and” or a slash, both owners must sign; with “or”, one owner can sell without the other (DMV: buying from a dealer).
  • Replace a missing title first. If the title is lost, stolen or damaged, complete REG 227 before anything else. Because your vehicle has a lienholder, section 5 of the REG 227 must be notarized (DMV title page).
  • File your release of liability. Notify the DMV within 5 calendar days of the sale with a Notice of Transfer and Release of Liability (DMV NRL page).

The buyer then submits the signed title to the DMV. The DMV says any change in ownership or lienholder must be reported within 10 days, and the title must be updated (DMV title page).

Our selling checklist walks through each step in order, including the odometer reading and the bill of sale. You may also need to hand over a smog certificate; see smog certificates when you sell for who needs one and when.

Is it a loan or a lease?

A lease works differently: the leasing company holds the title and sets the payoff and buyout steps. If that’s your situation, read selling a leased car in California instead.

Selling a financed car to a dealership

If you’d rather sell to a dealership, tell us about your car and choose Loan as the title status. A CarLinks agent will contact you and share your car with dealerships we work with. When one is interested, your agent handles the price conversation and books a visit, and the decision to buy is the dealership’s, after it inspects the car.

The lender’s payoff and release are part of how any sale closes, so have your lender’s answers to the questions above ready when your agent gets in touch.

You’re not obliged to sell at any stage. Start on the Sell my car page whenever you’re ready.

Sources

Checked October 2026.