The federal tax lien would have priority over your secured interest in the car. A security interest takes priority over a previously recorded tax lien only if the secured party does not have “actual notice or knowledge” of the tax lien at the time the security interest is created, which is not the case here. Consequently, if you decide to make the loan, we recommend requiring a co-signor or guarantor.

For resources related to our guidance, please see:

• Internal Revenue Code, 26 USC 6323(b)(2) (A filed tax lien “shall not be valid . . . as against a holder of a security interest in such security who, at the time such interest came into existence, did not have actual notice or knowledge of the existence of such lien.”)

• Internal Revenue Code, 26 USC 6323(h)(1) (“Security interest” means “any interest in property acquired by contract for the purpose of securing payment or performance of an obligation or indemnifying against loss or liability. A security interest exists at any time (A) if, at such time, the property is in existence and the interest has become protected under local law against a subsequent judgment lien arising out of an unsecured obligation. . . .”)