Learn about selling a vehicle with a loan to a private party or dealership. When the bank, credit union, or finance company holds the title as funders of the loan, they are part owners of the car until it’s paid off.
That begs the question: How can you sell a car if you don’t hold the title?
We’ll tell you about what you need to do to sell the car when you still owe money on it and provide tips for completing the sale.
If you’re selling your car with a loan, you’ll want to check the value of your vehicle. Use the valuation tool from our sister site Kelley Blue Book to obtain the estimated range for trading it in at a dealership or selling to a private party. You can also ask for an Instant Cash Offer from a dealership. It’s a no-obligation offer. With the offer or several in hand, it’s easier to know where you stand.
You’ll also want to find out from your lender how much you owe on your vehicle and ask about any early termination fees for the loan. Once you know the loan payoff amount, you will want to inquire about what other steps you must take to own the car fully. See more on that in the car value section below.
At this point in the call with the lender, you’ll need information for the selling scenarios below because each will be different.
Trading in the Car to a Dealership
- Ask the lender what it would take to trade in the car to a dealership. You can also check with the dealership to see what they need if you’re that far along.
- Find out what paperwork for the car you will need and how and where it needs to be signed. You can also ask the car dealership.
Selling the Car to a Private Owner
- Request all the details for completing a sale to a private party.
- Find out what kind of paperwork the lender will need to get the deal done. The paperwork could be as simple as bringing the buyer to the bank. Also, the lender will send the title to the buyer.
Check out these tips for those looking to sell a vehicle. These will help you ease your mind during the sales process.
1. Use the Buyer’s Money
Here’s the tricky part: Once you’ve determined the payoff amount and you’ve sold the car, you’ll have to use the buyer’s money to pay off the note. Of course, you can use your own money, as well. However, for many sellers, paying off the car won’t be possible without the buyer’s money.
The result is that some buyers won’t be comfortable with this type of transaction. To ease a potential buyer’s worry, ask the buyer to meet you at the bank where your car is financed and ask an employee to explain the situation. If the buyer remains uneasy, you may have to use your own cash to pay off the loan — or worse yet, look for a different buyer.
The good news is that many banks will accept payment directly from the buyer. We suggest asking the buyer to write two checks: one to your bank for the payoff amount and one to you for the remainder of your deal amount.
2. Transfer the Car Title
Once the buyer pays for the car, and you pay off the loan, the car title becomes free and clear.
Most banks give you two options: You can take the title or let the bank know where to send the title. If the buyer takes a loan out on the car, your financial institution will need to send the title to the buyer’s bank. Otherwise, the title can go directly to the buyer.
3. Ease Any Buyer Concerns
Those looking to sell a car while the bank holds the title will have to do a little more legwork, but it’s not impossible. Just be sure to go out of your way to ease the buyer’s concerns.
After all, the buyer is spending a large amount of money — and he or she is acting on your word that you’ll send along the title.
Related Car Buying Articles
- Selling a Car: Trade It In or Sell It Yourself?
- Millennials Are Buying Cheaper Cars
- Why Is Trade-In Value Lower Than Retail Value?
Editor’s Note: This article has been updated for accuracy since it was originally published.