Selling a Car with a Loan

When you sell or trade-in a vehicle, you’ll need to transfer the title to the buyer. 

However, when you finance a car, the lender will be listed as the lienholder on the title. In most states, the lender will be in possession of the title for the duration of the loan as well. 

All this means is that there are a few extra steps you’ll need to take if you want to trade-in or sell your car when it has a loan. 

How to Sell a Car with a Loan

In order to sell a car with a loan, you will need to pay off the loan in order for the title transfer to happen.

There are a few numbers you’ll need to gather in order to make it happen and to get the best deal. These include:

  • The payoff amount for your loan. 
  • The current market value for your vehicle. 
  • Your current equity. 

First, contact your auto lender to get your payoff amount. This is the cost of paying off the loan today in a lump sum. This number may include additional interest and fees you’ll owe. 

Next, find out the current market value for your car to estimate how much money you’ll be able to sell it for. 

Finally, subtract the payoff amount from the estimated value of your car. This will give you your equity. 

If the number is positive, that means you’ll make money on the sale. 

However, if the number is negative, you’ll still need to come up with the difference in order to pay off the loan. This is known as being upside down on your car loan. 

In most cases, you should try to sell the car when you have positive equity in it. This means you’ll make money on the sale, and the proceeds from the sale will cover the payoff of the loan. 

As you negotiate the deal with potential buyers, try to fetch a sale price that will at least cover the loan in full. 

When you find a buyer and have negotiated a price, talk with your lender about the best way to facilitate the sale. You may have the following options:

  • Have the buyer pay the lender, and the lender sends you the difference of the loan (if you have positive equity in the vehicle). 
  • Pay off the loan first, and transfer the title to the buyer yourself. 

Other than that, the sale will follow just like any other sale. Check out some of our other resources and articles to help you get the best deal and make it as easy as possible: