can you sell a car you still owe money on

Can I sell a vehicle I still owe money on?

The short answer is yes; you can sell your car without having fully paid it off. However, there are some caveats and details that are important to know. You will need to close your loan to sell your vehicle. This means settling your debts with your loan officer.

Can you trade a car in if you still owe money?

You can trade in your car to a dealership if you still owe on it, but this can be a costly decision if you have negative equity. Many people don't wait until they've paid off their car before they consider trading it in. This is usually because what you need in a vehicle changes during the time you're still paying on it.

Can I Sell my Car for less than I owe?

There are many things to consider when selling a used car; some less obvious than others, including income tax liability. In a nutshell, the Internal Revenue Service (IRS) views all personal vehicles as capital assets. If you sell it for less than the original purchase price, it's considered a capital loss.

Can you really make money selling cars?

Yes, lots of money. Decades ago, similar to other sales jobs, selling cars was a prestigious job that demanded salesmen to know about cars, about their customers, and about their competition. Although this is still true today, the difference is that the prestige is gone – as it is with most sales jobs.

What happens when you sell your car and still owe money?

When you owe more than your car is worth, you have to give the lender the difference between the sale price and what you owe. The buyer will pay the sale amount to the lender. You pay the difference.

How do you buy a car that is not paid off?

How to Buy a Used Car That Hasn't Been Paid OffAsk the Seller to Pay Off the Car Loan. ... Go With the Seller to Pay Off the Lien. ... Set Up an Escrow Account for the Vehicle. ... Get a Loan to Pay the Lien. ... Have a Dealer Broker the Automobile Sale. ... Buy a Certified Pre-Owned Vehicle. ... Buy a Less Popular but Affordable Vehicle.More items...•

Does selling a financed car hurt your credit?

If your car is worth as much as or close to the balance on your account, selling it could enable you to pay off the loan without harming your credit.

Can I sell my car back to the dealership?

Selling my car when it's on finance or PCP deal? You can sell your car to a dealership even if it's on finance from another dealership or lender.

What happens when you trade in a car that isn't paid off?

When trading in a car with negative equity, you'll have to pay the difference between the loan balance and the trade-in value. You can pay it with cash, another loan or — and this isn't recommended — rolling what you owe into a new car loan.

How can I get rid of my financed car?

5 options to get out of a loan you can't affordRenegotiate the loan. You can reach out to your lender and negotiate a new payment plan. ... Sell the vehicle. Another strategy is to sell the car. ... Voluntary repossession. ... Refinance your loan. ... Pay off the car loan.

Is it smart to sell a car with a loan?

If you have positive equity, you can profit when you sell your financed vehicle. But if you're upside down on your loan and have negative equity on your car, you could lose money on the transaction, so it may make sense to wait before selling.

How much will my credit go down if I surrender my car?

A voluntary repossession will likely cause your credit score to drop by at least 100 points. This point drop is due to a couple of factors: the late payments that cause the repo and the collection account that is likely to result from it.

What does it mean to sell a car with equity?

Selling Your Car With Equity. Selling your vehicle privately when you have equity means that you pay off your loan with the money from the sale, and keep what the buyer gives you that’s above the payoff amount . If you’re financing through a bank or credit union, you and the buyer may be able to meet there to take care of the payment and ...

Can you sell a car with negative equity?

Selling Your Car With Negative Equity. The process of selling your car privately when it’s upside down is essentially the same as if you had equity. There’s just one major difference: if the value of your vehicle is less than what you owe, you’re probably not going to get enough from the sale to cover the loan payoff.

Can you sign a title after you pay a lien?

Once the lender is paid, they send a release of lien letter to you. After you receive the letter and a check from either the lender or buyer, you can sign the title so the buyer can title and register the car for license plates. Make sure you check with your state’s laws on selling a vehicle privately to see if you need to accompany ...

Can you pay a car loan if it is sold?

In this case, you can either meet at the bank or credit union with the buyer and you both pay the lender, or, if the lender doesn't have an office where you can meet, both you and the buyer must send checks to the lender.

Can you stop paying off your car when you sell it?

The payoff amount also changes due to interest charges and payments made while selling your vehicle, since just because you’re trying to sell it doesn't mean you can stop making payments. The second step you should take to sell your car privately when you still owe money on it is to find out the estimated value of your vehicle.

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Can you send a check to a lender for a loan?

Otherwise, you can typically have the buyer send the lender a check for the loan payoff amount, and, once that check has cleared, give you a check for the remainder. If the buyer prefers to pay the lender in full, the lender then cuts you a check for the difference.

How to prove you paid off a car?

To prove to the seller that you paid off the car, obtain from the lender a signed lien release or a letter on the lender's letterhead stating that it holds no financial interest in the car. Buyers generally won't be willing to pay unless you have a clear title you can furnish during the sale. A clear title is one that is clear of any claims.

What do you need to do when selling a car to a private party?

When selling to a private party, you may have to visit a state agency to complete the transfer. Most states require the buyer to go to the state agency that administers vehicle titles to register a vehicle and provide a certificate of the title as proof of ownership.

How to find out how much you owe?

Step 1: Determine Your Payoff Amount. It's a good idea to start out by checking with your lender for guidance and to find out exactly how much you owe. To make it official, get a payoff letter from your lender. This official document states the payoff amount, a date by which the amount is still accurate, and instructions for completing the payment, ...

How to get lienholder off title?

If you want to get the lienholder's name off of the title but don't have the money to pay off the loan, consider obtaining a low-interest loan with a short repayment term, then pay it off after receiving funds from the sale of the vehicle.

What happens if you don't pay for escrow?

Escrow services such as Escrow.com can facilitate a deal and protect both buyers and sellers. If the buyer doesn't pay, you keep the title. If you don't deliver the title and the vehicle, you don't get the money. The key is to find a third party that is affordable, reputable, and easy to work with.

What does it mean to transfer a car title?

Transferring the title generally involves signing the back of the title to indicate that you are giving up ownership to the buyer. You also may need to supply the buyer with a bill of sale, which contains seller contact information, sale date, sale price, vehicle odometer reading, and signatures of both parties.

Do interest charges change when you sell your car?

You may not know exactly when you’re going to sell your vehicle, and interest charges will change the amount of your loan daily. Armed with all the details, you won’t get caught by surprise. Your payoff amount also includes interest you owe until the time you plan to pay off your loan and other unpaid fees.

Private sale versus trading in at the dealership

There are a lot of reasons why vehicle owners may choose to privately sell a vehicle instead of trading in at a vehicle, and they usually have to do with money.

Can you privately sell a vehicle with a lien?

Most vehicles on the market that are only a few years old tend to still have a bank lien on them, meaning the bank holds the title until the vehicle is paid off.

Things to keep in mind when privately selling a vehicle

There are several things to keep in mind when privately selling a vehicle, especially if that vehicle is still under a bank lien. Under no conditions will you be able to get the vehicle’s title to transfer it during a private sale until the loan has been fulfilled, either by yourself or the buyer.

What happens if you sell a car to a dealership?

If you sell to a dealership, they may give you the difference between the money still owed to the financing company and the selling price, or they may apply it toward paying for a new car. This depends if you are planning on buying from the same dealership. 1. /.

What is a lien on a car?

Lien is another word for financial interest. While you owe money to a bank, the bank has a lien on your car. Selling a car you have not yet paid off is not as simple as selling a car you own outright. This article will address how to sell your car even if you still own money on it. The exact process will change depending on who you are selling ...

Can you sell a car with a lien on it?

Normally you could simply sell the car, but when you still own money, you do not have the lien to the car. In order to sell a car with a lien on it, you need to pay off the bank with the lien to have it removed. Once the lien has been removed, you can proceed with the sale.

Can you transfer a car title to a buyer?

You will not be able to transfer the title to the buyer if there is still a lien on the car, and you will not be able to pay off the loan to remove the lien without transferring the title to the buyer, so they will pay the bank the pay-off amount.

Do you have to sell a car if you still own it?

It will also depend on if you are buying a car from a dealer with proceeds from the sale, or if you are only selling. Normally you could simply sell the car, but when you still own money, you do not have the lien to the car.

First things first

If you want to sell a car with finance owing whether through a dealership or private sale there are a few things worth considering, such as:

Looking for a great car loan?

The table below displays some of the unsecured personal loan products available on Canstars database for a three-year loan of $10,000 in Auckland (some may have links to lenders websites). The products are sorted by Star Rating (highest to lowest) followed by company name (alphabetical).

Selling a car with finance owing can I do it?

Yes. You can sell a car with finance owing. This could entail selling to a dealer, as a trade-in for another vehicle, or, it could be a private sale. Either way, it is possible. However, there may be some extra steps involved when selling a car with finance owing. It really depends on the type of car loan you have.

Trading in your car with finance owing

Trading in your vehicle can be a good way to sell your car while still being able to afford a new one.

Selling your car privately with finance owing

Selling your car privately may be a good option if you are looking to downgrade your car, or, you are simply looking to pay off the loan with no need for a new vehicle. As while a private sale may cover the full remaining loan, the money left over may not be enough to cover the cost of a new vehicle.

What are my other options for selling a car with finance owing?

Paying off the loan in full will make things much easier. This way, the car will be yours to keep or sell or trade-in as you please. If you have enough savings to pay off the loan, this could be a good option. While having savings is good, if it comes at the cost of accruing interest and spiralling debt, it may not be worth it.

About the author of this page

This report was written by Canstar Content Producer, Andrew Broadley. Andrew is an experienced writer with a wide range of industry experience. Starting out, he cut his teeth working as a writer for print and online magazines, and he has worked in both journalism and editorial roles.

What happens if you trade in a car that's worth more than you owe?

When you trade in a car that’s worth more than you owe, the dealer gives you a credit for the difference to use toward the purchase of your next car.

How to sell a car privately?

1. Ask your lender for the “payoff amount” and how to handle the transaction. The payoff amount is how much it will cost to own your car outright. The loan must be paid off completely for the lender to release ownership and sign off on the title. If you’re planning to sell your car privately, also ask the lender about the necessary steps.

What happens if you sell a car with negative equity?

Selling a car with negative equity means you need to give the lender all the money from the car sale and pay for the negative equity. With this information in hand, let’s look at each scenario.

How to get more for a car in a private party sale?

3. Subtract the payoff amount from the value of the vehicle.

What happens if you are upside down on a car loan?

But if you’re upside down on the loan, the dealer will likely offer to add the negative equity amount into the loan on your new car. Tread carefully with this option because it means you’re actually taking out a bigger loan for the next car.

Can you sell a car with a loan?

It’s not difficult to sell a car with a loan on it — but it adds extra steps and might take a little longer. When you have a loan, the lender is, in a sense, part owner of the vehicle. The lender’s name may be listed on the car title or the lender may actually hold the title. This is to ensure you can’t sell the vehicle and transfer ...

Is it better to take a personal loan or a car loan?

Personal loans are more expensive than most car loans; you'll need to pay it off as quickly as possible. A title in hand can make a private sale much easier. If you have excellent credit, you may be able to take an unsecured personal loan to cover the entire amount owed on the car.

What happens if you trade in a car you still owe money on?

If you’re trading in a car you still owe money on, you’re looking at one of these two situations: You have positive equity. If your car is worth more than the amount you owe on your loan, you’re in good shape. This difference is called positive equity and it’s like having money that you can apply toward the purchase of a new car.

How to trade in a car you still owe?

If you plan to trade in a car you still owe money on, first contact your auto loan lender and ask for your payoff amount (which could be slightly higher than your remaining balance). Price your car. Look up the current trade-in value of your car on a pricing guide.

How to trade in a car that has been paid off?

To trade in a car that’s not paid off, bring the following items to the dealership: 1 Loan information, including payoff amount and account number. 2 Driver’s license. 3 Vehicle registration. 4 Your vehicle keys and any remotes. 5 Proof of insurance. 6 A printout of your trade-in value.

How long can you keep a car loan if you downsize?

As you set up your new loan, avoid extending your loan term for more than 60 months for a new car or 36 months for a used one.

What does it mean when you need a car but don't have equity?

It also means that you’re creating a larger loan amount and paying more interest. However, if you need a car but don’t have the money to pay off the negative equity and are having trouble keeping up with your current car payments, it might be worth the risk.

What happens when you trade in a car?

When you trade in your car to a dealership, its value is subtracted from the price of the new car. When you trade in a car with a loan, the dealer takes over the loan and pays it off. The dealer is also supposed to handle the paperwork, such as the transfer of the title, which establishes legal ownership of the vehicle.

Is a trade in car negotiable?

It’s important to keep in mind that both the price of the new car and the value of the trade-in are highly negotiable. To get an overall good deal, you’ll need to get a good interest rate on your new loan and a fair price for both the trade-in and the new car.