Can You Scrap A Car With A Lien On It? [IN 2026]
Scrapping a car with a lien on it is a bit more complicated than scrapping a car with no lien because when the car owner takes out a loan to buy a car, the lender (such as a bank or financing company) has a legal right to hold the title of the vehicle until the loan is paid off. In this article, we will explore whether you can scrap a car or not, the legal way to scrap a car, and some beneficial tips.
Can You Scrap a Car With a Lien on It?
No, you cannot scrap a car if it has an active lien against it. Doing so may be considered as fraud or the criminal offence of theft by conversion under the Criminal Code of Canada, because you are selling or destroying a property or asset in which another party has a legal and financial interest. So the car cannot legally be sold to a scrapyard without the lender’s consent or by settling the remaining loan.
How to Scrap a Car With a Lien on It?
If you want to scrap a car that still has a lien on it, you must follow the given steps to complete the process legally.
1. Check the lien status
Contact the lienholder to confirm the lien’s status and the remaining debt that you have to pay. Alternatively, you can find out the debt associated with your car through a provincial lien search service, such as the Personal Property Security Registry (PPSR) or CARFAX Canada. Fees are typically between $8 and $20, and searches can usually be done within minutes.
2. Assess the Scrap Value and the Remaining Debt
Contact the different scrap car removal service providers in your area and request a quote by providing all the necessary details to get the valuation of the vehicle. Compare this recently received valuation offer to your outstanding debt.
3. Obtain the Permission or Pay Off the Debt
Now there are a few proven ways left that can be taken into action to scrap a car with a lien on it.
- Obtain Permission to Scrap the Car: Contact the lender to discuss the other options because some lenders may allow you to scrap the car in some cases, such as if the vehicle is no longer drivable and you’re still liable for the remaining loan balance. In that case, you may get permission to scrap the car, but the payout you receive will be used to pay the remaining balance of the debt.
- Pay off the lien: The most straightforward method is to pay off the outstanding debt. Once the debt is settled, request a lien release document from your lender, which may be a bank or financing company.
4. Obtain the Lien Discharge Certificate to Get Ownership
Once the debt is settled, request your lander to provide a copy of this discharge certificate for your records. Based on this lien discharge certificate, you can transfer your ownership back to you and try to update the title at your provincial motor vehicle registry. After that, you will be considered the real owner of the car, and you can then legally do whatever you want, whether sell the vehicle in the used car market or sell it in the scrap market.
Risks of Scrapping a Car With an Active Lien
Attempting to scrap a car without the permission of the lender usually stops at the first stage, as buyers like scrap yards or auto recyclers may refuse to accept the vehicle because they will conduct VIN checks before accepting it. If you still somehow managed to scrap it, then it may lead to serious legal consequences, such as:
- Legal action from the lender
- Fines range from CA$1,000 to CA$5,000 for individuals and higher for businesses
- Difficulty in future financial dealings or vehicle transfers
What If You Can’t Pay Off the Lien?
If you are in a dire financial situation and unable to pay off the lien, then scrapping the car may become even more challenging. But you must not worry much about it, as there are still some options available that you can try:
- Negotiate with the Lienholder: Although it is not guaranteed that the matter will be resolved, try to explain your situation to your lienholder and propose a process to settle the remaining debt. Try to convince them to accept the payout of the scrap car as partial payment to settle the existing loan, or whatever proposal they may like.
- Voluntary Repossession: In some cases, the lienholder may agree to take possession of the car, especially if it’s worth less than the outstanding debt, so surrender the vehicle to the lienholder, who may sell or dispose of it to recover the debt.
Final Thoughts
In Canada, you cannot legally scrap a vehicle that has a lien without settling the lien or obtaining permission from the lienholder. Scrapping a car without clearing the lien is a risky endeavour that could have long-term financial and legal implications. Although regulations and procedures for scrapping a junk car may vary by province, the liens are enforced nationwide via secured lending laws.
Remember to stay updated, and don’t hesitate to seek professional advice if needed!
