With a loan left to pay, it is still possible to sell your car even in a private party sale. the key is usually finding the patient buyer.
Selling a car is a tedious enough process; if the vehicle you’re trying to sell still has a loan against it, you have the makings of a potential headache.
Don’t worry, though. It’s still possible to sell your financed car, but you’ll need to jump through a few hoops to accomplish your objective and make sure the sale is above board and legal.
Information You’ll Need
Start by getting some basic information about your loan and your car:
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.
- If the loan is from a local bank, or one with local branches, they’ll probably tell you to find a buyer and bring them to a bank office to sign the paperwork.
- If you have a loan with an online lender, they’ll likely direct you to a bank partner or another financial entity to complete the transaction.
2. Determine what your car is worth
Using a pricing guide, such as Kelley Blue Book or Edmunds, find the current private party value of your vehicle, what you’re likely to get if you are selling the car yourself, or the trade-in value of your vehicle, which is roughly what a dealer will give you for the car.
Generally, you’ll get more for your car in a private party sale than when you trade it in.
Consider getting a purchase offer from CarMax or another dealer offer; it’ll serve as a good benchmark for you to beat and as a backup in case your plans fall through.
3. Subtract the payoff amount from the value of the vehicle.
If the result is positive, you have equity in your car; if it’s negative, you’re upside down on the car loan. 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.
The sale of any vehicle should start by getting a reasonable estimate of its value. Kelly BlueBook or Edmunds.com are two trusted sources for car valuations. In fact, you should get estimates from both sites.
Enter as much detail as you can about the car in order to get the most accurate value. You should focus on “private party,” since this is the sales route that you will be taking.
They also provide “trade-in,” in case you want to go down that path, and “dealer retail,” which won’t apply since you aren’t an auto dealer.
An accurate estimate of the value will be very important in pricing the car, particularly if there is a loan on the vehicle.
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Get Your Loan Payoff Balance
Contact the lender who holds your car loan, and ask for the payoff balance. (Note: This will be slightly different than the balance on your last statement, as interest accrues daily.)
Then compare the loan balance to the estimated value of the car.
That will tell you whether the car has sufficient value to pay off the loan and allow you to walk away with some cash, or if you will need to write a check upon the sale of the car in order to pay off the loan.
This is an important step – if you determine that the likely sale price of the car will not be sufficient to pay off the loan you will have to come up with that cash or you won’t be able to sell the car.
But you want to know that before accepting an offer from a buyer.
Naturally, the fact that you have a loan on the car will be a complication. Even if there is sufficient value in the vehicle to make the sale worth it, it’ll be harder than it would be otherwise because the lender holds the actual title to the vehicle.
Enlist Your Lender in the Sale
Once you know the payoff on the car loan and have decided to go ahead with the sale, you should get the lender involved in the sales process. They hold the title to the vehicle, and you can’t sell the car without it.
Ask your car lender the best way to proceed so that you can pay off the loan and deliver the title to the buyer in the shortest time possible. This is not an uncommon occurrence, so the lender should have procedures in place.
Accept Only Cash or an Official Bank Check
You can never afford to be casual about this part of the sales process! You are almost certainly selling your car to a person you don’t know.
This can include someone with less than honorable intentions, including someone who is fully prepared to commit outright fraud. Though you should always hope for the best, you need to prepare for the worst.
The first rule never accepts a personal check from the buyer whether for full or partial payment of the sale price. A personal check can bounce, in which case the buyer will have both the cash and your car in his or her possession.
It’s even possible that the buyer can pass a check that is entirely fraudulent, such as one drawn on the account of an unknowing third party.
For that reason, you should accept only cash or a bank check for payment. A bank check or cashier’s check is issued by the bank itself.
To be extra careful, insist on going to the bank with the buyer to get the official check so you know it’s legit — there are Craigslist scams in which buyers pass counterfeit bank checks that are impossible to detect until they bounce.
This may be inconvenient – and even a bit embarrassing – but it better to swallow that bitter pill up front than deal with cleaning up a certified mess later on.
Just always remember that selling your car to a dealer is not like selling to a private party. They simply will not pay you as much for the car as an individual will. For that reason, you owe it to yourself to try and sell your car privately first.
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