Sell a Financed Car
Step-by-step guidance to sell a car with a loan or lien: payoff letters, title transfer, handling negative equity, credit considerations, and a faster alternative.
How to Sell A Financed Car
Buying a vehicle usually comes with some type of auto loan or financing. Unless you are lucky enough to purchase a car in cash, you will most likely have a 3-to-6-year loan on your vehicle. Even though this is the norm for most car buyers in America, it can cause some confusion when it comes time to sell your car or trade it in. Thankfully there are a few steps that can be taken to make sure you do everything correctly if you still owe money on the car you are selling. Selling a car with positive equity is possible.
The first step is always understanding what you have left on your existing loan. Knowing your payoff amount is the most important thing. From here, you can use many tools like webuyanycar.com to determine the fair market value of your used car. If your market value is greater than the existing loan, then you are in positive equity on your vehicle. If the loan amount is more than your car is worth, then you are in negative equity, or "underwater". When you are in positive equity, the buyer will pay the loan holder the remainder of the financing, and you will receive a check for the rest. With negative equity, they will pay off the value of the vehicle, and you will be responsible for paying off the rest. But don't worry, the team at webuyanycar.com is here to help you with all of those steps.
Always consult your bank or credit union before the car sale so you can acquire all information regarding your personal loan. Whether you are in positive or negative equity, your loan holder will be able to walk you through the process of selling a car that you owe money on.
Understand Your Buyer
The most important thing when selling a used car with an outstanding loan balance is understanding just who you are selling to. When selling privately, financing and loans may cause some skepticism from potential buyers. Buying agencies and dealerships are going to be much better equipped to handle complications from lenders or existing financing.
If you are persistent on selling to a private party, it is important to be as upfront as possible, and have all of the details on the loan available from the lender. Present this information before any potential test drives. Tell them you have spoken to the bank and know exactly how to move forward. It is never a bad thing to pay off the loan on your own prior to listing the vehicle.
Can You Sell a Financed Car?
Yes, it is possible to sell a financed car. However, there are some important steps you need to take to navigate the process correctly:
Contact your lender: The first step is to reach out to your lender to understand their specific requirements and procedures for selling a financed car. You will need to figure out your payoff amountThey will provide you with information on what is needed to transfer the title to the new owner.
Determine the car's value: Assess the current market value of your car. This will help you determine a reasonable selling price and negotiate with potential buyers.
Pay off the loan: In most cases, the loan needs to be paid off in full before you can transfer the title to the new owner. If the selling price of the car is higher than the remaining loan balance, you can use the proceeds from the sale to pay off the loan. If the selling price is lower than the loan balance, you will need to pay the difference out of pocket to clear the debt.
Transfer the title: Once the loan is paid off, the lender will provide you with the necessary paperwork to transfer the title to the new owner. This typically involves signing over the title and providing a lien release to remove the lender's claim on the vehicle.
Complete the sale: Once the title is transferred, you can finalize the sale with the buyer. Make sure to provide them with all the necessary documentation, such as the bill of sale and any maintenance records.
It's important to note that the specific process and requirements can vary depending on your location and the terms of your loan. Consulting with your lender and, if needed, seeking legal or financial advice can help ensure a smooth transaction.
What If My Car is Worth Less Than I Owe?
If your car is worth less than the balance of the loan, it means you have negative equity or are "upside down" on the loan. In this situation, there are a few options you can consider. If you have the financial means, you can pay the difference between the car's value and the loan balance out of pocket. This will allow you to clear the debt and transfer the title to the new owner. Contact your lender and explain the situation. In some cases, they may be willing to work with you to find a solution. They may offer options such as a payment plan for the remaining balance or allowing you to transfer the loan to another vehicle you own. If you still want to sell the car despite the negative equity, you can proceed with the sale and cover the remaining loan balance out of pocket. This will require you to pay off the loan in full before transferring the title to the new owner.
It's important to carefully evaluate your financial situation and consider the potential impact of each option. Consulting with your lender and, if needed, seeking advice from a financial professional can provide you with more personalized guidance based on your specific circumstances. Thankfully, there are some options to sell your vehicle, even if you are in negative equity.
Can Selling a Financed Car Hurt My Credit?
Selling a financed car itself does not directly hurt your credit. However, there are potential factors related to selling a financed car that could indirectly impact your credit.
If you sell your financed car and use the proceeds to fully pay off the remaining loan balance, it can have a positive effect on your credit. Paying off a loan demonstrates responsible financial behavior and can improve your credit history and credit score over time. If you're unable to sell the car for an amount that covers the remaining loan balance and you stop making payments, it can lead to default or late payments on the loan. This can have a negative impact on your credit score and credit history. It's important to communicate with your lender if you're facing difficulties selling the car and making payments. If you sell your financed car and decide to purchase another vehicle, you may need to apply for a new auto loan. The process of applying for a new loan can result in a hard inquiry on your credit report, which may cause a temporary dip in your credit score. However, the impact is usually minor and short-lived if you manage your credit responsibly.
Remember, maintaining a positive credit history involves making timely payments, managing debt responsibly, and communicating with your lenders if you encounter financial challenges.
How Can I Transfer The Title?
The process for transferring the title of a car can vary depending on your location and the specific requirements of your local Department of Motor Vehicles (DMV) or equivalent authority. However, here are some general steps to guide you through the title transfer process.
Visit the website of your local DMV or contact them directly to understand the specific requirements for transferring a car title in your area. They can provide you with the necessary forms, fees, and documentation needed for the transfer. Typically, you will need the following documents:
Vehicle title: You will need the current vehicle title, which may be held by your lender if the car is financed.
Bill of Sale: Prepare a bill of sale that includes details of the transaction, such as the buyer and seller information, sale price, and vehicle information.
Lien release: If your car was financed and the loan is paid off, you will need a lien release from the lender. This document verifies that the loan has been satisfied and removes their claim on the vehicle.
Odometer disclosure statement: Some jurisdictions require an odometer disclosure statement to ensure accurate mileage reporting.
Fill out the title transfer forms provided by your local DMV. These forms typically require information about the buyer, seller, vehicle details, and the transaction. Ensure that all information is accurate and complete.Submit the completed forms, along with any additional required documentation and fees, to your local DMV office. This may include payment for title transfer fees, taxes, and registration fees. Once the title transfer is processed, provide the buyer with a copy of the newly transferred title, bill of sale, and any other relevant documents.
It's important to note that the specific requirements and procedures can vary by jurisdiction, so it's advisable to consult your local DMV or appropriate authority for precise instructions on transferring the title of a car in your area.
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FAQs
Will you still buy my car if I owe money on it?
Yes. We can arrange to settle your outstanding payoff directly with your lender as part of the purchase.
What documents do I need if my car has a lien?
Bring a recent 10-day payoff letter, your ID, and standard sale docs. After payoff, your lender provides a lien release for title transfer.
What if I have negative equity?
You can still sell. We’ll apply the vehicle value toward your balance and you can cover the remaining amount to clear the lien.
Will selling a financed car hurt my credit?
Paying the loan off in the sale is generally positive. Missed or late payments while selling can hurt—stay current and coordinate with your lender.
How do I transfer the title when there’s a lender?
After payoff, obtain the lien release and complete DMV forms per your state. Provide the buyer with the signed title and bill of sale.