Why is it important to have the account number for the trade-in car loan when completing a vehicle trade-in transaction?

• A. It helps the buyer negotiate a lower price for the new vehicle.
• B. It ensures the correct loan is paid off and the lien is released from the traded vehicle.
• C. It allows the dealership to determine the original purchase price of the vehicle.
• D. It is required to transfer the vehicle's title to the new owner.

Answer: (B)

Verified step by step guidance

1. Understand the concept of a lien: A lien is a legal claim or right against a property, such as a vehicle, that is used as collateral to secure a loan. When a vehicle is financed, the lender places a lien on the vehicle until the loan is fully paid off.
2. Recognize the importance of the account number: The account number for the trade-in car loan is crucial because it identifies the specific loan associated with the vehicle being traded in. This ensures that the correct loan is addressed during the transaction.
3. Ensure the loan is paid off: During a vehicle trade-in transaction, the dealership typically pays off the remaining balance of the loan on the traded vehicle. Having the correct account number ensures that the payment is applied to the right loan.
4. Release the lien: Once the loan is paid off, the lien on the traded vehicle is released. This is necessary for the dealership to take ownership of the vehicle and for the title to be transferred to the new owner.
5. Avoid complications: Providing the correct account number prevents errors, such as paying off the wrong loan or failing to release the lien, which could delay the transaction or create legal issues.