Yes you can buy from a seller who is currently financing the car.
You both agree on a price, sign a bill-of-sale stating the vehicle description (miles, color, year, make, model, VIN, seller name(s) and signature(s) associated with the auto loan) and the price.
Paying the lienholder directly does not mean you nor your bank will receive the title. The title will go to the seller after the full-balance is paid off. You can write the check to both the seller and the lienholder to hedge against the seller NOT applying the funds toward the loan balance.
I recommend conducting this at the lien-holding bank. The seller should be able to complete all required actions there to receive a bank lien-release letter. And depending on the state, the bank can complete a lien-release online in which the DMV may process it within 2-hours. Regardless if there’s an online process, upon receipt of the letter, you and the buyer can go to the DMV to receive the “clean” title, in which the seller can then endorse it for you to register.
A major hold-up is if the seller is upside down after the sale. If this is the case, he has to pay the remaining balance before the bank will release the lien.
