How to Sell a Car You Haven’t Paid Off

How to Sell a Car You Haven’t Paid Off

Do you know where your car title is? If you took out an auto loan to buy your car (and who doesn’t?), the bank might have your title. That means they own your car, at least in part, until you pay off the outstanding balance of the loan. And that’s why they can repossess the car if you stop making your payments. Because the car is, at least in part, theirs too. A lot of people wonder then whether you can sell a car with an outstanding loan. Absolutely you can. This article is brimming with tips to make that transaction go smoothly, so everyone involved-the buyer, the bank, and you-are happy with the outcome.

Know Your Loan

First step: ask your bank for the loan balance, specifically the payoff total, which may be higher due to projected interest or payoff penalties. You want to make sure that after the sale of your car you can cover this entire amount. If you don’t, you might only have one car but two auto loan payments. And that’s a hard road to hoe. You might be tempted to pay off the loan balance if you think you’ll have the funds soon. We recommend you hold off until you tie off that loose end. You may not get as much for your trade-in as you thought. For now, it’s enough to know the loan balance and payoff procedure.

Dealership or Private Seller?

Dealerships are knowledgeable, convenient, and confident, but private buyers might pay a little more. You need to decide which is aspects are more important. First of all, dealerships are used to buying cars that have outstanding loans. It’s par for the course in their line of work. Private individuals, especially inexperienced ones, might be nervous that you’re not able to hand them the title right away.

People Talking to Salesperson

Dealerships also can make the transaction a speedy one. This is what they do all day long every day. You can probably drive into the lot and sell your car to the dealership all within a single afternoon. A private buyer, on the other hand, first needs to be found, a meeting arranged, and cash exchanged. If you’re planning on turning around and buying a new car, you still have that to do. A second transaction also means that the government will dip into your pocket twice.

I Owe More Than My Car’s Worth. Now What?

In rare cases, you may have a payoff amount that’s more than anyone is willing to give you for it. In the auto industry, we say the car is upside down or underwater. In that case, you’re responsible for settling the difference. A bitter pill to swallow, but in the end you can end up right side up. Remember to shop around for the best deal, then pay the difference on the loan. If you have enough cash on hand after that, the dealership can sell you a new or used car, like an affordable Kia Forte.