Car loans can help get a vehicle when you can’t afford one; they provide a financial boost when you need to purchase a car. However, car loans can also be very complicated for people who don’t know much about the loan process.
If you’ve bought a car through a loan and wonder if you can sell a car with a loan on it and how to go about it, you’re in the right place. This guide will walk you through the process in various scenarios and provide valuable insights into selling a financed car.
Can You Sell a Car With a Loan on It?
Yes, you can sell a car with a loan on it, but it’s not as straightforward as selling a car without a loan.
To ensure a smooth process, follow these steps:
- Obtain Payoff Amount: Start by contacting your lender to get the “payoff amount” and transaction instructions. This amount represents the total required to fully own your vehicle. A lender requires that the loan is completely paid off before the title is released.
- Inform Dealership or New Lender: If you plan to purchase a replacement vehicle simultaneously, provide the payoff amount and lender details to the dealership or your new lender. This helps facilitate the sale of your current car to finance the new one. If you’re opting for a private sale, consult with your lender for the necessary procedures. Some local banks may require in-person visits, while online lenders may direct you to a partner or another financial entity for transaction completion.
- Determine Your Car’s Value: Use pricing guides like Kelley Blue Book or Edmunds to determine your car’s current worth. For private sales, focus on the private party value; for dealer transactions, consider the trade-in value. Generally, private sales yield higher prices. It’s also a good idea to obtain purchase offers from online car buyers or other dealers to establish benchmarks and backup options.
- Calculate Equity: Subtract the payoff amount from your car’s value. A positive result means you have equity in your car. If it’s negative, you have what’s called an upside-down car loan. Selling a car with negative equity means you must remit all proceeds from the sale to the lender and cover the negative equity.
With these essential details in hand, let’s explore various scenarios to help you make informed decisions.
Scenario 1: You Make a Private Sale With Positive Equity
When your car’s value exceeds the amount you owe on your loan, it sets the stage for a straightforward private sale. Here’s how it works:
- Lender Payoff: The buyer will pay the total agreed-upon amount to the lender. In this scenario, if you still owe, let’s say, $5,000 on your car loan, and the buyer offers $15,000 for your vehicle, you’ll walk away with a tidy $10,000 in your pocket.
- Title Transfer: Both you and the lender will jointly endorse the car’s title, which will then be handed over to the buyer. The buyer will proceed to the state’s Department of Motor Vehicles (DMV) to complete the necessary registration and title transfer.
It’s worth noting that having the car’s title solely in your name can streamline the private sale process. If you have an excellent credit score, you may even consider securing an unsecured personal loan to pay off the entire car debt before selling. This keeps the title exclusively in your possession.
In case you are only up to a few thousand short but have bad credit a payday loan from Loan For Success can help ease the sale. However, it’s advisable to settle the loan promptly once you’ve received the buyer’s payment. This scenario allows you to benefit from your car’s positive equity, providing you with a smooth and profitable private sale experience.
Scenario 2: You Have to Sell Privately With Negative Equity
When your car’s value is lower than your outstanding loan balance, selling it privately becomes more challenging. Here’s how it works:
- Buyer Pays Lender: The buyer will pay the agreed-upon sale amount directly to your lender. If, for example, you owe $10,000 on the car loan and the buyer offers $9,000 for the car, you’ll need to cover the $1,000 shortfall to satisfy the lender.
- Title Transfer: After this, you and a representative from the lender will jointly sign the car’s title, which will be handed over to the buyer. The buyer will then proceed to obtain a new title and registration.
One option is to secure payday loans online through trusted platforms like Loan For Success to cover the deficit. However, keep in mind that payday loans often come with higher interest rates, so prompt repayment is crucial in this scenario.
Scenario 3: Trading in a Car You Owe Money On
Trading in a car with an outstanding loan balance can be convenient, but it requires careful consideration:
- Dealer Handles Paperwork: When you trade in your car, the dealer manages all the necessary paperwork. If your car’s value exceeds your loan balance, you’ll receive credit for the difference, which can be applied toward your next vehicle purchase.
- Dealing With Negative Equity: If your loan is underwater (meaning you owe more than the car’s value), the dealer may suggest rolling the negative equity into the loan for your new car. Be cautious with this approach, as it means taking on a larger loan for your next vehicle. Before committing to this option, explore the possibility of refinancing your current car loan at a lower interest rate instead of acquiring a new car loan.
- Smart Decisions Save Money: To make informed decisions, it’s essential to check your credit score and ascertain the interest rate you qualify for. Before visiting the dealership, secure preapproval for a new loan to steer clear of inflated interest rates. Additionally, become well-acquainted with the trade-in value of your current car and the actual market value of the vehicle you intend to purchase. If the dealer’s offer significantly varies from these values, explore alternatives, such as seeking another dealer or opting for a private sale, to ensure you get the best deal possible.
Scenario 4: Bank Wants the Payoff Prior to Vehicle Sale
If your lender insists on receiving the full loan payoff amount before you can transfer the car title to the buyer, you’ll need to cover this amount. Here’s what to do in this situation:
- Refinance Your Auto Loan: Explore the option of refinancing your auto loan. This may help you secure a lower interest rate or extend the loan term, which can reduce your monthly payments and accelerate equity buildup.
- Consider a Personal Loan: If you have good credit and can qualify for favorable rates, you might consider taking out a personal loan. With the loan funds in hand, you can promptly pay off your auto loan and obtain the car title. Keep in mind that personal loans generally come with higher interest rates compared to auto loans.
- Explore Payday Loans: If the required amount is a few thousand dollars, consider getting a payday loan from Loan For Success, where you may be able to borrow up to $5,000 in a day, depending on state limits.
- Use Your Savings: If you have savings available, using them to cover your loan balance can be a wise choice. This approach helps you avoid interest and fees. While it may deplete your savings, it can be a viable option, especially if you have a less-than-ideal credit score.
Conclusion
Selling a car with an existing auto loan is entirely possible, whether through paying off the loan with the sale proceeds or trading it in. However, the decision to do so should be carefully considered, taking into account your unique financial circumstances and the potential outcomes of the sale.
In many cases a little additional cash may be required, consider getting a payday loan payoff for your auto loans using Loan For Success. The platform is safe and puts you in touch with thousands of lenders to get you your cash advance as fast as possible.
FAQs
What happens if you sell a car with a loan on it?
To sell a car with an existing loan, you’ll typically need to cover the full loan payoff amount for the lender to release the car title to the buyer. If you have positive equity, any surplus will be reimbursed. However, if you still owe on the loan, you’ll be responsible for the difference.
Should I pay off my car before trading it in?
Paying down or off your auto loan before selling or trading it in is often a wise choice. It hinges on whether you have positive or negative equity on the loan. In cases of negative equity, it’s advisable to clear the auto loan before proceeding with the trade-in.
How much negative equity will a bank finance on a new car?
There is no fixed maximum limit for financing negative equity when getting a new car loan. The amount can vary depending on your specific circumstances. It’s advisable to consult your local bank or lender to determine the options available in your case. Consider getting a loan payoff amount in the form of a payday loan to make the sale.