How to sell a car when you still owe money on it.

Some car owners wonder if they can sell a car that’s not paid off. The short answer is yes. However it’s a bit more complicated than selling a car that is fully paid off. Here are a few things that you need to know.

Before you advertise your car for sale, you need to gather two figures: the value of the car and your loan payoff balance. Both are relatively easy to get.

Determine the value of the car

Two good places to help determine the fair value of your car are Kelley Blue Book and Edmunds. After entering details about your car such as mileage, condition and features, both services provide two values; one if you are selling to a private party and another if you plan to trade in the vehicle.

Determine your loan payoff amount

Getting your loan payoff balance is as simple as contacting your lender. The payoff balance will be slightly different than the balance on your last statement since interest will have accrued since then.

Analyze your numbers

Once you know your car’s fair value and loan payoff balance, you can figure out where you stand financially.

If the car’s value exceeds the loan payoff, you have positive equity – this is great news! For example if your car is worth $12,000 and your loan balance payoff is $8,000 you have $4,000 of equity. When you sell the car you’ll have $4,000 to pocket or put toward another vehicle.

A less desirable situation is if the loan balance payoff exceeds the value of the car. This is called upside-down or negative equity. If you sell the car you’ll have to make up the extra cash to pay off the loan. For example, if you sell a car with at a fair market value of $15,000 and the loan payoff balance is $18,000, you’d need another $3,000 for the lender to release the title.

If you’re upside-down on your car and trade it in, a dealer will apply the negative loan to a new loan. It’s best to avoid this situation because you’ll likely be upside-down with the new car, too.

Transferring title

Once you make arrangements for the transfer of money – keeping in mind that cash or cashier’s checks are the best way for you to receive payment – your next step will be to transfer the title.

If you have an existing car loan, you will have to pay the lender off and have their name removed from the car’s title before you can complete the sale. It is best to let a buyer know about the lien as it may complicate the sale a bit.  It is also a good idea to reach out to your lender early in the process to ask about the process for paying off the loan and removing their lien from the title.

Financing your next car

When you purchase your next car, turn to Consumers for competitive rates on auto loans that will help you save money. You can work directly with us by applying online or ask your dealership for financing through Consumers Credit Union.

Consumers provides banking services for more than 120,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

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