You can still sell your car even if you still owe money on it, but there are a few more steps involved. But whether you should sell or not will depend on a number of things, such as how much is still owed on your loan and how much you can get for it.
Ready to Sell? Get offers now.License Plate
To begin, gather some basic details regarding your loan and vehicle:
1. Find out the “payoff amount” and the best way to complete the transaction from your lender. The payoff amount represents the total cost of owning your vehicle outright. For the lender to release ownership and approve the title, the loan must be paid in full.
2. What to do if you’re simultaneously buying a replacement car. You’ll need to give the dealership or your new lender the payoff amount and lender details if you’re selling the car to buy a new one. Asking the lender about the required procedures is also advisable for those who intend to sell their car privately.
- If the loan originates from a local bank or a bank with local branches, you will likely be instructed to locate a buyer and bring them to the bank so they can sign the documentation.
- If you have a loan with an online lender, they will probably send you to a different financial institution or a bank partner to finish the transaction.
3. Determine what your car is worth. Find the current private party value of your car, what you should probably get if you sell it yourself, or the trade-in value of your car, which is approximately what a dealer will give you for it, using a pricing guide like Edmunds or Kelley Blue Book. In general, selling your car privately will fetch you more money than trading it in. To ensure you beat the offer and have a fallback in case things don’t work out, think about obtaining a purchase offer from an online car seller or another dealer.
4. Subtract the payoff amount from the value of the vehicle.
- You own equity in your vehicle if the outcome is favorable.
- If its negative, youre upside down on the car loan. When you sell a car with negative equity, you have to pay the lender the whole selling price as well as the outstanding balance.
With this knowledge in hand, let’s take a closer look at a few distinct scenarios.
Private sale with positive equity
The buyer will pay the lender the full amount if your car is worth more than you owe, and the lender will then give you the difference. Alternatively, the buyer will make a separate payment to you and pay the lender the remaining amount on your loan. For instance, if your buyer will pay $15,000 for your car and you still owe $5,000, you will receive $10,000 from the sale.
After that, you sign the title with the lender and give it to the buyer. The purchaser obtains a new registration and title from the state’s department of motor vehicles by bringing the signed title and any other necessary documentation.
A private-party sale may be simpler if the title is in your name alone. If your credit is really good, you might be able to get an unsecured personal loan to pay off the whole balance of the car before you sell it. The lender won’t be listed on the title in the case of an unsecured loan. You will receive the title, and the vehicle will be exclusively yours. Even with excellent credit, the rates on unsecured personal loans are higher than those on most auto loans, so make sure to pay them off as soon as the buyer’s check clears.
Private sale with negative equity
The buyer will reimburse the lender for the sale amount if you owe more than your car is worth. You settle the remaining balance on the car loan by paying the difference. For instance, you would pay the lender the $1,000 difference if your buyer agreed to pay $9,000 for your car but you owed $10,000 before the sale. After that, you and a lender representative sign the title and give it to the buyer so they can obtain a new registration and title.
One way to bridge the gap if your credit is good is to take out a personal loan. However, personal loans have higher interest rates than the majority of auto loans, so you must pay them back as soon as you can.
A private sale may be simpler if the title is in your name alone. If your credit is really good, you might be able to get an unsecured personal loan to pay off the whole balance of the car before you sell it. The lender won’t be listed on the title in the case of an unsecured loan. You will receive the title, and the vehicle will be exclusively yours. When the car sells, you can pay back the majority of the loan.
Trading in a car you owe money on
In this case, the dealer can handle all the paperwork. The dealer gives you a credit for the difference when you trade in an automobile that is worth more than you owe on it, which you can apply to the cost of your next vehicle.
However, the dealer will probably offer to roll over the negative equity amount into the loan for your new vehicle if you’re upside down on the loan. Use caution when choosing this option as it entails taking out a larger loan for your next vehicle. Rather than purchasing a new car, you might want to think about refinancing your current loan at a lower interest rate.
Making these wise choices now will save you a ton of money if you plan to trade in your car and obtain a new loan:
- Find out what interest rate you qualify for by checking your credit score.
- A new loan should be preapproved before you visit the dealership. This will prevent the dealer from raising the new loan’s interest rate.
- Find out the true market value of the car you’re purchasing as well as the trade-in value of your current vehicle. Try another dealer or sell the vehicle to a private party if the dealer won’t give you anything close to these prices.
Ready to Sell? Get offers now.License Plate
Sometimes, before releasing the title, an online lender will demand payment of the entire loan balance. You can sell your car after paying off the loan if you have the money to do so.
If not, request that the buyer send the lender the money and have the title mailed to them. This will work if you are close with the buyer—for example, a neighbor or friend. However, convincing more purchasers to trust this procedure and invest the additional time needed will be more difficult.
There are times when private buyers are hesitant to take the extra steps to purchase a car that you are loaned. However, if you handle it correctly, many buyers wont object. A bank or other reputable financial institution involved can reassure the buyer that everything is being done correctly.
This loan information is not required to be included in your classified car listing. However, once you think you have a serious buyer, give them the rundown before setting up a test drive. Inform them that you’ve spoken with your lender and are aware of the precise actions needed.
These actions typically won’t prolong the sale. In fact, even in cases where a loan is not involved, it is a good idea to close a car deal at a bank. It offers a secure location for meetings, and bank staff are typically able to respond to inquiries regarding car transactions.
About the authors Philip ReedPhilip is an automotive expert who writes a syndicated column forNerdWallet. He has appeared on national TV and radio and once wore a hidden camera for ABC News to show how to haggle for a used car. His passion is helping people save money in their automotive budgets.
FAQ
What happens if you sell a car with a loan on it?
Yes, you can sell a car with an existing loan. The sale must bring in enough revenue for you to pay off the remaining balance of the loan. Should this prove unfeasible, you will need to contribute a portion of your own funds, since the lender will not release the vehicle title until the debt is settled.
Can someone take over my car loan?
At the DMV, the new owner will finalize the new loan documentation and transfer ownership. Assumable loans are offered by certain lenders, enabling you to assign your debt to another individual. You will not be permitted to transfer your loan to another individual if your lender does not include loan assumption in your loan documentation.
Will CarMax buy my car if I still owe money on it?
If I have debt on my car, will CarMax still buy it? Information about the loan is required so that CarMax can settle with the lender. You will have to pay the difference if your offer was higher than what you owe.
How do I sell a financed car with negative equity?
You will have to pay off the remaining loan balance in full or roll it over into a new loan if you want to sell a financed car with negative equity. In either case, it’s crucial to move cautiously, particularly when it comes to fresh funding.
Read More :
https://www.nerdwallet.com/article/loans/auto-loans/how-to-sell-your-car-when-you-still-have-a-loan
https://www.lendingtree.com/auto/how-to-sell-a-car-when-you-still-have-a-loan/