Selling Your Car While You Still Owe Money on It

January 9, 2019 | By Mason Roberts


Many times people are ready to get rid of their car but feel “locked-in” because they still have a loan on it. But it's not impossible, and can be done! It may, however, take a little more work than selling it without a loan.

While you are the owner of the vehicle, and it is your name on the title, things change a little bit when you have a loan on a vehicle. Having this loan makes the lender have some sort of ownership in your car as well.
Typically, the lender either has their name placed onto the title or holds the title in their possession. This is basically a reassurance for the lender that the owner of the car cannot sell the car without first paying what they owe.

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When choosing to sell a car, one will either sell to a private party or trade it back in to a dealership. You first need to find out how much you owe on your loan. You also need to speak to the lender about how the transaction will be handled, and also how much you are going to get for your vehicle.


Where to Start When You Still Have an Auto Loan to Pay Off

Finding out your payoff amount is a key piece to getting ownership back to your car. When this is paid, the lender will officially no longer have any rights to the title of your vehicle.
They'll sign off on the title. There may be a different route in which the lender would like to take if you are trying to sell the car to a private party. If your auto loan has been taken out with a bank, you will need to assure the bank that you have a buyer. Many times, they will ask you to bring the buyer with you into their facility to sign paperwork.


Your Car's Value

There are many websites available for free to help you find out the price of your vehicle and its worth, like Kelley Blue Book and Edmunds.
Through these, you can find out the private party worth of your car; this means how much money you'll get for the vehicle if you choose to sell it yourself. You also have the option to find out the worth of the car as a trade-in. This would be the amount you receive if you trade-in your car to a dealership. In most cases, people prefer to sell to a private party because you'll typically receive a higher amount that way.

How Much You Owe on Your Auto Loan

Although it is exciting to see how much money you can receive for your vehicle, you cannot forget that you still have to pay off your loan. When you start to see how much your car is worth, you need to subtract the amount you still have left to pay on your auto loan.


If you're still in the positives after subtracting your loan amount from your worth amount, then you have positive equity in your vehicle. This positive amount is your money to do with what you please.
On the other hand, after subtracting your loan amount, it is possible that you may be in the negatives. This is called being “upside-down” on your auto loan. When you are trying to sell a car that has an upside-down worth, you will need to relinquish all of the money you will receive for the car to the lender, and pay for the negative amount as well.


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Private Sales

If you go to sell your car and have positive equity, there's an extra step in the car sale.
When you make the sale, the buyer will pay for the car by providing your lender with the money. The lender will then give you the remaining money after the loan is deducted from the worth of the vehicle. Another option is that the private party buyer will pay the lender the remainder of your loan, and provide you with the remainder of money from the sale.
Both you and the new buyer will be expected to be present with the lender. At this time, you and the lender will sign over the title to the new buyer. This title signature will place the ownership of the vehicle in the hands of the new buyer.

Escaping Negative Equity

Things are different if you are trying to sell your car with a negative equity. This means that after the sale, you still owe money to the lender. When you sell the car, you can pay the remainder to the lender in cash.
You may, however, not have the cash to pay the lender. This means that you may have to take out another loan. The buyer you find will have to pay the sale price of the car directly to the lender. Then, you will be expected to pay the remainder with either your cash or another loan.


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If you are having trouble getting approved for another loan, there is one other option you have. If you have another vehicle, you can take out an auto title loan on that vehicle to finally get rid of your second vehicle for good.
An auto title loan is a loan that you take out on a car that you own. This can be helpful to you if you have a very high-interest rate on your current loan and are already past due. It will buy you some time to set aside money from a few of your paychecks to finish up this loan once and for all.

Auto Title Loan

You may think, “Why would I take out an auto title loan to pay off another loan?” but it can be extremely helpful when used wisely. It may feel risky, but if it's a calculated risk, a stitch in time saves nine. With some planning and dedication, you can get the time you need to prevent late payments and high interest, and fully rid yourself of your debts for good! Find out more about how an auto title loan can help free you from the negative equity cycle today.