How to Sell Your Car If You Have Still a Loan
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Selling Your Car If You Have Still a Loan
You must pay off the loan in order to transfer ownership. The lender is liable for any difference between balance and sale price.
By Philip Reed Auto Loans Specialist | Edmunds.com Philip is an auto expert who writes a syndicated article for
NerdWallet. He has been on national TV and radio and once wore an invisible camera for ABC News to show how to haggle for a used vehicle. His goal is to help people cut costs in their car budgets.
22nd October, 2021
Edited by Samantha Allen Lead Assigning Editor Samantha Allen leads the insurance team at NerdWallet. Previously, she was the digital managing editor for the magazines Financial Planning and On Wall Street. She was a graduate of Northwestern University’s accredited financial planner course and has been covering personal finance and managing wealth for more than 10 years.
Many or all of the products featured here are provided by our partners who compensate us. This affects the products we write about as well as the place and way the product is featured on a page. But this doesn’t affect our assessments. Our opinions are our own. Here’s a list and .
It’s not difficult to sell a car that has the loan on it, but it adds extra steps and may take longer.
If you’re in possession of an loan, the lender is in essence, the owner of the vehicle. The lender’s name may be listed on the car title, or the lender might actually own the title. This is to ensure you won’t be able to sell the vehicle as well as transfer ownership to a next owner, without receiving its money — or the remaining balance in the loan.
Whether you want to or sell it to an dealer, it’s important to know the amount you have to pay on your loan or credit card, whether it’s higher or less than what you’ll get by selling your car and also how your lender requires you to handle the transaction.
Information you’ll need
Start by getting some basic information about your loan and car
1. Request your lender to provide the «payoff value» and how you can handle the transaction. The payoff amount is the amount that it will cost to own the car in full. The loan must be paid completely for the lender to let ownership go and sign to the car title. If you’re looking to sell your car privately, also consult with your lender regarding the steps to take.
If the loan is from a local institution, or one that has nearby branches, the bank will tell you to find a buyer and bring the paperwork to a bank to sign the loan paperwork.
If you have an loan with an online lender, they’ll likely direct you to an affiliate bank or other financial entity to complete the transaction.
2. Consider what value your car has. Utilizing a price guide like Kelley Blue Book or Edmunds, find the current of your vehicle, what you’re likely to get when you sell your car yourself or sell your vehicle approximate value that dealers will offer you for the vehicle. It’s likely that you’ll get higher value for your car when you sell it when you sell it privately than when you trade it in. You might want to consider a dealer offer; it’ll be a great reference point to beat and provide an alternative in the event that your plans fall through.
3. Subtract the amount of payoff from the market value of the car. If the results are positive, you have equity in your car; If it’s negative, you’re . Selling a vehicle with negative equity means you need to repay the lender of the money earned from the purchase and then pay the equity you don’t have.
With this knowledge in the palm of our hands, let’s take a look at each scenario.
Private sale with equity positive
The buyer will pay the full amount to the lender and the lender will then transfer the remainder to you. Or, the buyer will pay your remaining loan amount to your lender and then make another installment to your. For instance that you owe $5,000 and the buyer is going to pay $15,000 for the car, you’ll receive $10,000 in the purchase.
Then, you and the lender sign the title and present it to the buyer. The buyer will take the title that has been signed (and any other required paperwork) to the department of state of motor vehicles , and receives an updated license and registration.
A title in hand can make a private party sale significantly easier. If you’ve got excellent credit, you might be able to take an unsecure personal loan to pay the total amount due on the vehicle. If you take out an unsecure loan, the lender won’t be put upon the vehicle’s title. The title will be transferred to you, and the car will remain yours for the sole time. But the rates for personal loans, regardless of whether your credit is great, will be higher than those for auto loans that you pay off when you’ve got the buyer’s check in the bank.
Private sales with equity that is negative
When you owe more than your vehicle is worth, you need to pay the creditor the difference between the cost of the sale and what you have to pay.
The buyer will pay the amount of the sale directly to the loan provider. The lender will pay the difference. For example, if you still owe $10,000 and your buyer will pay the sum of $9,000 to purchase your car then you must pay the lender the $1,000 difference. Then you and a representative of the lender sign the title and give it to the buyer so that they are able to obtain a new name and registration.
If you’re a credit-worthy person, you can take a personal loan to pay for the gap. Personal loans are more expensive than typical car loans and you’ll have to pay them off as quickly as possible.
A title with a title could make the process of selling your car much more simple. If you have excellent credit, you may be able to get an unsecured personal loan to pay the total amount owed on the car. If you take out an unsecure loan, the lender will not be named on the title. The title will go to you and the vehicle will be yours alone. You are able to pay back the principal of the loan after the vehicle is sold.
Car you owe money for
In this case the dealer will manage all paperwork. When you trade in a car that’s worth more than you owe, the dealer will give you a credit of the difference that can be used towards the purchase of your next car.
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However, if you’re upside-down on the loan and the lender isn’t able to meet your needs, they will likely offer to add the negative equity amount into the loan for your new vehicle. Take care when deciding on this choice because it could mean you’re actually taking out a larger loan for your next vehicle. It might be worth looking at a lower interest rate rather than getting a new vehicle.
If you’ll be taking out an auto loan when you sell your vehicle, these wise choices will help you save money:
and know what interest rate you can qualify for
before you go to the dealership. This will keep the dealer from over-inflating the interest rate on the new loan.
Know the trade-in value of your car, and also the price of the car you’re buying. If the dealer won’t offer you a price that is close to these, try another dealer or sell the car to a private party.
Other variations
In certain cases, an online lender will need the entire balance of the loan before it will release the title. If you have money ready to repay the loan before selling your car, you may do so. If you want to, ask the buyer to provide the money to the lender and then have the title mailed directly to them. In the event that you are in a good relationship with the buyer (like your neighbor or friend) this will work. But it will be harder for other buyers to believe in this method and invest the time and effort it takes.
Working with buyers
If you decide to sell a vehicle that you’ve a loan on certain buyers might be skeptical and reluctant to follow the additional steps. If you do it correctly, many buyers will be happy. Involving a bank or an institution that is recognized by the financial industry will give the buyer confidence that it’s being done correctly.
You don’t need to put this loan information in your classified car listing. But once you feel that you’ve found a buyer who is serious be sure to explain the situation prior making arrangements for an appointment for a test drive. Let them know that you’ve had a conversation with your lender, and you know exactly what steps are required.
In the majority of cases, these steps won’t add time to the process of selling. In fact, closing a deal at a bank is recommended even when there is no loan isn’t required. It’s a safe gathering location and, typically bank personnel can help with questions about vehicle transactions.
The author’s bio: Philip Reed is an expert on cars and writes a syndicated column for
NerdWallet that has been carried through USA Today, Yahoo Finance and others. He is the author of 10 books.
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