Selling Your Car If You Still Have a Loan

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Selling Your Car If You're Still in the process of obtaining a loan
You must repay your loan in order to transfer ownership. You are responsible to the lender for the difference between your balance and sale price.
by Philip Reed Auto Loans Specialist | Edmunds.com Philip is an automotive expert who writes a syndicated column for
NerdWallet. He has appeared on national radio and television and even wore an invisible camera for ABC News to show how to bargain for a used vehicle. His passion is helping people save money on their budgets for automobiles.





Oct 22 2021


Edited by Samantha Allen Lead Assigning Editor Samantha Allen leads the insurance team at NerdWallet. She was previously the managing editor of digital for the two publications Financial Planning and On Wall Street. She was a graduate of Northwestern University's accredited financial planner course and has been writing about personal finance and managing wealth for over 10 years.







The majority or all of the products featured here are from our partners who pay us. This influences which products we review as well as the place and way the product is featured on a page. But this doesn't affect our opinions. Our opinions are our own. Here is a list of and .



It's not difficult to sell a car that has a loan on it -- however, it requires additional steps and could take longer.
If you are a recipient of an loan the lender is, in a sense, an owner of the car. The lender's name may appear on the title, or the lender might hold the title. This is to ensure you won't be able to sell the vehicle as well as transfer ownership to a buyer without getting its money -- or the remaining balance of the loan.
Whether you want to or sell it to a dealer, it's important to be aware of the amount you owe on your loan, whether it's more or less than what you'll be able to obtain by selling your vehicle and the way your lender requires you to manage the transaction.
You'll need the following information
Start by getting some basic information about your loan and car
1. Contact your lender to find out information on "payoff value" and how to handle the transaction. The amount of payoff is the amount that it will cost you to own your vehicle for the full amount. The loan must be paid completely for the lender to take ownership of the vehicle and sign on the title. If you're looking to sell your car privately, inquire with the lender about the required steps.
If the loan originates from a local institution, or one with local branches, they'll suggest you find the buyer and bring the paperwork to a bank to sign the paperwork.
If you have a loan through an online lender, they'll most likely direct you to an affiliate bank or other financial institution to finish the transaction.

2. Consider what your car is worth. Using a pricing guide such as Kelley Blue Book or Edmunds, find the current of your vehicle, what you're likely to get in the event of selling your vehicle yourself or sell your vehicle, which is roughly what dealers will offer you for the vehicle. Generally, you'll get more money for your vehicle in a private party sale than the time you sell it. You might want to consider a dealer offer; it'll provide a reference point to beat, and also as an alternative in the event that your plans fall through.
3. Subtract the payoff amount from the value of the car. If the result is positive, then you have equity in your car; If it's negative, then you're . Selling a car with negative equity is a requirement to pay the lender all the money from the car sale and pay for the equity that is negative.
With this information at mind, let's examine each scenario.
Private sale with positive equity
The buyer will pay the total value to lender and the lender will then transfer the difference to you. In other words, the buyer will pay your remaining loan amount to your lender and make another repayment to you. For example that you owe $5,000, and the buyer will pay $15,000 for your car, you'll receive $10,000 in the sale.
Then, you and the lender sign the title and give it to the buyer. The buyer takes the signed title (and any other documents required) to the state's department of motor vehicle and is issued a an updated registration and title.
A title in hand can make a private party sale much more straightforward. If you've got excellent credit, you may be able to take an unsecured personal loan to pay for the full amount due on the vehicle. If you take out an unsecure loan the lender won't be put on the title. The title will go to you, and the car will remain yours for the sole time. But rates on unsecured personal loans even if your credit is good, will be higher than the majority of auto loans and you must pay it back in the moment you get the check from the buyer banked.
Private sale with negative equity
If you are owed more than your vehicle has value, then you have to give the creditor the difference between the cost of the sale and what you owe.
The buyer will pay the amount of the sale directly to the loan provider. The buyer pays the difference. For instance, if you still owe $10,000, and the buyer is willing to pay the sum of $9,000 to purchase your car then you must pay the lender the $1,000 difference. Then you together with a representative of the lender sign the title and give it to the buyer so that they can get a new title and registration.
If you're creditworthy then you could get a personal loan to cover the gap. These personal loans are more costly than the majority of auto loans; you'll need to pay it off as quickly as possible.
A title with a title could make the process of selling your car much easier. If you have excellent credit, you might be able to get an unsecure personal loan to pay the total amount owed on the car. With an unsecured loan, the lender is not placed upon the vehicle's title. The title will come to you, and the car is yours to keep. You can repay the bulk of the loan after the vehicle is sold.
Car you owe money for
In this scenario the dealer is able to handle all the paperwork. If you exchange an automobile that is worth more than what you owe, the dealer offers you credit for the difference that can be used towards the purchase of the next vehicle.
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If you're in the red on the loan and the lender isn't able to meet your needs, they will likely offer to add the amount of equity that is negative to the loan for your new vehicle. Be cautious with this option as it implies you're getting a bigger loan to purchase the car you'll be buying. You might want to think about at a lower interest rate rather than buying a new vehicle.
If you're planning to take out a when you trade in your car, making these smart choices can make a huge difference in money:
and know what interest rate you can qualify for
before you go to the dealership. This will stop the dealer from over-inflating the interest rate for your new loan.
Find out the value of your trade-in for your car, and also the price of the car you're considering buying. If the dealer won't offer you close to these prices consider a different dealer, or offer the vehicle to a private buyer.

Other variations
In certain situations, an online lender will require the full balance of the loan before it will release the title. If you have cash available for the payment of your loan and then sell your car, you may do so. Otherwise ask the buyer to provide the money to the lender, and get the title delivered directly to the buyer. When you've got a good connection to the seller (like your neighbor or friend) this will be a good idea. However, it can be difficult 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 you have a loan on certain buyers might be hesitant and uneasy to take the extra steps. If you do it correctly, many buyers will be happy. Involving a bank or known financial institution can give the buyer confidence that the transaction is being handled correctly.
It is not necessary to include this loan information on your classified car listing. But once you feel you've got a serious buyer be sure to explain the situation prior scheduling the test drive. Inform them that you've spoken with your lender and are aware of the exact steps required.
Most of the time, these steps will not add any time to the selling process. In fact, closing a car deal with a bank is a good idea even when it's not a loan isn't required. It's a secure meeting place and, usually, bank employees can answer any questions related to the transactions of a vehicle.



The author's bio: Philip Reed is an automotive expert who writes a syndicated column for
NerdWallet is a brand that has been used by USA Today, Yahoo Finance and more. He is the author of 10 books.







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