How to Sell Your Car When You Still Have a Loan

Some people decide that they want to sell their car, even though they haven’t yet paid off their auto loan. The good news is that you can do this. Any consumer has the right to sell their vehicle to another party, provided that they are capable of paying off the loan to transfer the title of the vehicle. For most people, the sale will cover that difference, but if it doesn’t, you’ll be left to pay off the loan.

In that instance, it might not be a good idea to sell. Most people only sell or trade their cars when they have enough equity to garner a sale price that’s enough to pay off the loan and leave a little pocket change for their next purchase. No matter what your circumstances are, if you have a car with a loan and you want to sell, here’s what you need to know. 

Find Out How Much You Owe

The total amount left on your loan payments and the payoff amount are usually different. That’s because interest is compounded monthly on installment loans, so the “payoff amount” today is going to be different than if you wait three months and request it.

Ø  Don’t assume you know your payoff amount. It’s not the same as the remaining loan balance, in most cases.

If you’re selling your car privately, you can also use this call to find out the steps involved in the process. For example, a local bank will probably tell you to just come in for a local transaction, while an online lender will explain their online process for completing the transaction.

Determine Your Car’s Value

What you owe isn’t necessarily the value of your vehicle. In fact, most times, those are two vastly different numbers. Use pricing tools like Edmunds, Kelly Blue Book, or Auto Trader to get the current value of your vehicle. You can find out:

·  Private party value: What you’d get from selling to another person, AKA a “private entity.”

·  Trade value: What you would get by trading your vehicle in at a dealership.

Some may also include a third estimate of what you’d get from selling outright to a dealer, which is usually less than you’d get in trade.

The Transaction

When you have positive equity, the sale process is relatively simple. You will find a buyer for your vehicle and agree on a price. Then, they will pay the full price, either to you or to the lender.

·  If they make the payment to the lender (such as in the case of a dealership sale), the lender will then send you a check or electronic check for the difference between the payoff and the sale amount.

·  If they pay you directly, you must send the payoff amount to the lender, then you can keep the rest.

Once the money has exchanged hands, you will need to obtain the title from the lender so that you can sign it over to the buyer. They will take that title and their other paperwork to the Department of Motor Vehicles to get their new title and registration, and the transaction is complete.

Whether you’re looking to upgrade your vehicle or you just want to sell it while the market conditions are favorable, you don’t have to pay it off first. Follow these steps and the instructions of your auto loan provider to sell your car when you still have a loan. Then, you’ll be able to move on to your next vehicle purchase or enjoy your profits in another way.