How to Sell Your Car With a Loan | What to Do If You Still Owe Money

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Selling your car is often complicated enough on its own. And if you still owe money on it, the task is made even more troublesome. It is typically easier to sell a vehicle that you own free and clear. However, you do have some options when it comes to selling a car that is currently being financed. What route you take to sell your car with a loan depends on several factors, such as where your loan is currently held and who you got it from. It makes a difference whether the lender is a dealer or a private buyer. We will discuss the details of both, as well as your best options for selling your vehicle.

What’s the Payoff Amount?

It’s best to start by checking with your lender. They can provide you with guidance and direction and tell you how much is remaining on your loan. When the payoff amount has been verified, request that your lender give you a payoff letter.  This is an official document that states the total payoff amount. Other pertinent information includes the payoff date, directions for finalizing the payment, and accepted types of payment. Since not everyone knows exactly when they might sell their vehicle, it’s important to stay apprised of any changes to interest rates. It isn’t uncommon for interest rates to change, and as such, you want to take advantage of these changes if they are adjusted in your favor.  When you have all of the necessary data handy, it’s time to contact your lender. Ask them if they can suggest how to best go about selling your car with a loan and if there are any prepayment penalties. You also want to know how long it will take to process the title after the lien is released. It’s unlikely that a vehicle is sold with the loan outstanding. Instead, the loan is closed out at the time of the sale or just before. After the loan is paid in full, the lender can then release the lien on your car, allowing you to transfer the title to the new buyer. The sooner that you can get the clear title in your buyer’s hands, the better.

Pay off Your Loan

The best thing you can do is pay off your loan well before selling your vehicle. Doing this will give you a clear title to work with. When the new buyer is ready to purchase your car, you can simply sign over the title to them and be done with it. What’s more, you’ll have a much easier time selling your vehicle. Buyers like an easy buying process and don’t typically want to deal with the added hassle that liens present. However, you’re likely reading this blog because you’ve been put in a unique position that will allow you to sell your vehicle while still owing on your loan. Let’s look at some helpful examples of getting your loan paid off promptly so that you can give the new buyer of your vehicle a clear title.  First, find out how much your vehicle is worth. There are plenty of resources that you can use to help you determine your car’s value. These include Kelley Blue Book or the National Automobile Dealers Association ( NADA ). Once you have the value, you will have a far easier time negotiating its sale price with the buyer. If you determine that you’re upside-down on your loan, you’re going to want to pay on your debt to ensure that you don’t take a loss. The last thing you want is to owe more than your vehicle is worth. At this juncture, you’ll need to do all that you can to raise money to pay off your loan. If you have a buyer for your vehicle, it makes more financial sense to put off selling it until you can pay down your loan. The goal is to ensure that you have positive equity in your vehicle, not negative. If you can’t borrow money from a close friend or family, it might be best to take out a small-interest loan. Although this may sound counter-productive, getting a small loan with a short term will ensure that you make money from the sale of your vehicle, not the opposite. Check with your bank or local lenders to see what the best rate you can get is. Once the funding is secured, pay off your loan. You will then be able to give the buyer a clear title and make a profit on the sale of your car.

Get a Clear Title

As soon as you transfer the title to the new buyer, the sale will be complete. In turn, this will allow the buyer to get the vehicle registered in their name. To transfer the title, you will need to sign the back of the title, indicating that you are handing over ownership to the buyer.  You might also need to give the buyer a bill of sale, as this contains the seller’s contact information, the sale date and price, the car’s odometer reading, and signatures of both the buyer and seller.  Each state is different in its requirements. If you aren’t familiar with what your state requires, you’ll need to check online or contact your loan DMV or BMV and ask what needs to be filled out on the back of the title. Selling Your Car to a Dealer If you are selling to a dealer, you don’t necessarily need to pay off your loan. Instead, you can simply trade it in as it is to a dealer and get a different vehicle in return. This is often the easiest route to go when selling a car with a loan. Dealers know how to handle all of the paperwork and specifics behind the scenes. What’s more, many car dealerships can complete your trade in less than a day. If you’re unable to pay off your loan, this may very well be your best option. However, keep in mind that you’re likely going to take a big hit in terms of what your vehicle is worth on trade-in. As such, you may be limited on the models of cars you can get in return, or your debt will be transferred to your new vehicle. The cost of avoiding paying off your loan is that you’ll pay more on your trade-in in the long run. Selling Your Car to a Private Buyer Selling to a private buyer will often ensure that you get the best price. Many times, you can sell it for more than wholesale and made a nice profit. As long as the buyer trusts you, it’s easier to sell a car with a loan. It’s important to document everything, as this can help avoid potential legal hassles. It’s risky if they get pulled over before you are able to pay off your loan and provide the buyer with a clear title. But if they can show that they bought the car from you in good faith that you would continue to pay off the loan, it’s doable. The new buyer is likely to have difficulty registering the vehicle, but if they are willing to wait, you can make a profit from the sale and start chipping away at what’s left on your loan. It goes without saying, but you’ll want to be sure that you will follow through on your promise and pay the loan off. It would be prudent to put everything in writing before the sale to ensure that both you and the buyer are on the same page. If you fail to make your payments, the buyer risks having the vehicle repossessed and losing their investment.  It will be better for both parties if you make sure to pay off your loan sooner rather than later. If you are currently behind on your payments, it would be wise to use the money from your car’s sale to get your loan caught up.


Here at Seek Capital , we want you to be well-prepared for life’s big decisions. Choosing the best option for selling your car with a loan will ensure far fewer hassles in the long run. For more tips on common challenges, be sure to check out the rest of our blogs section .  There, you will find a wealth of information that covers vehicles, small business, loans, and more. We encourage you to take advantage of our articles, as there is much to learn that will serve you well in your day-to-day dealings. If you have any questions in the meantime, please feel free to contact us any time. Our business experts are always here to lend a helping hand. Sources

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