As we know, even selling a car that still has a loan on is not hard, but doing so requires additional processes and could take a little bit more time. If you have a loan on the car, the lender is considered a co-owner in some sense. The lender’s name will be printed on the car’s title. Moreover, the lender will physically retain the title in their possession. This is done to ensure that you will not be able to sell the car and transfer the title to the new owner without providing the lender with the money it is owed, which is the remaining balance on loan.
Whether you want to sell your car to a private party or trade it with a dealer, you will need to know many necessary details in this article.
List of Contents
Is It Possible to Sell a Car while Still Owing Money?

Absolutely, there are several options for selling a car with an existing loan. You should remember that if the sales price is less than the loan total, you must pay the remaining loan debt. Your alternatives, with the assistance of financing institutions and dealerships, as well as the state’s department of motor vehicles (DMV), include the following:
- Exchange the car at a new-car dealership
- Sell the car in a private transaction
- Sell your car to a used car dealer
- Pay off the remainder of the loan
4 Things to Consider before Selling a Car With a Loan
It may not look very easy, but a little planning can make the process of selling your car with a loan much easier. Here are a few things that might be useful.
1. Get Ready for the Transaction

You and the loan officer will generally be the parties involved in the transaction to sell your car. The loan officer will complete the transaction and sign the title of the car to the buyer. This is true regardless of whether you have positive or negative equity in the car. Before you go to this meeting, you should make sure that you have asked your lender exactly what you and the seller will need to give to complete the transaction go as smoothly as possible, such as the paperwork and the money for sale.
After that, you will receive a new registration and title for the car by going to their local Department of Motor Vehicles (DMV) with the signed title and any other applicable papers.
2. Consider the Value of Your Car

The gap between what you owe on your loan is called value. If the value of your car exceeds the amount owed on your loan, you have a positive value. If you owe more than the value of your car, you have a negative value. It is also known as being “upside down” on loan.
3. Understand the Value of Your Car

The next step is to determine the current market value of your car. Due to widespread supply-chain concerns caused by the Covid-19 epidemic, the industry is suffering a scarcity of new cars, which means the market for both new and used vehicles is heated.
You may quickly determine the current worth of your car by visiting a vehicle valuation website such as Edmunds, Kelley Blue Book, or Cars.com. Significantly, you will need to know the vehicle’s year, make, model, zip code, and overall condition. Cars less than three years old are more valuable, although cars up to five years old are in demand.
4. Gather Loan-Related Information

You must contact your lender to determine the amount owed on your loan. Because of interest, prepayment penalties, or other costs, this may be slightly greater than the current balance stated on your monthly statement.
The lender has custody of the title and effectively owns the car as long as you owe money on the auto loan. Before the lender transfers the title, you must satisfy the payback amount. Your lender can also explain the procedures you will need to follow to pay off your loan and sell your car, regardless of your choice.
The Effects of a Private Sale on Your Loan

Before the epidemic, the best price for a secondhand car was frequently obtained through a private transaction. However, adopting this path means you and the buyer must complete all the administrative work independently. That is why it is critical to obtain the current payoff amount and the documentation required by the lender and to inquire about how the lender intends to conduct the transaction.
However, it would be best if you remembered that before the loan officer can sign the title to the buyer, the lender must receive the total payback amount. The lender will pay you the difference if you have a positive value in your car. If you have a negative value, you must pay the difference to the lender before the agent’s hands over the title to your buyer.
Using an Existing Loan to Selling a Car

In comparison to a private-party sale, a dealer trade-in is a comparatively simple transaction. If the value of your trade-in car exceeds the loan repayment amount, the difference will be applied to the purchase price of the new car. If your payment amount exceeds the trade-in car’s value, the dealer will apply the difference to your new car loan.
Is Selling a Car with a Loan the Best Decision?

If you are unsure whether selling your car is the best decision for you, there are some choices to consider as follows.
- Consult Your Lender
Since your lender owns the title to your car, they should be your initial point of contact. They want this transaction to go successfully for you, their customer, and themselves as the lienholder on the car. Your lender can assist you in determining your payment amount, navigating the steps to sell to a private party, or determining the interest rate you qualify for.
- Refinance Your Loan
Initially consulting with your lender, you may determine that keeping your present car and refinancing your loan is the best option rather than selling the automobile. Depending on your credit, refinancing may result in a reduced interest rate. Moreover, it can save you money on monthly payments and maybe allow you to pay off your loan sooner.
You could also choose to extend your repayment period to achieve a lower monthly payment. You have to keep in mind that a longer term will cost you more in interest throughout the life of the loan.
- Leverage Your Savings
If you have a substantial savings account and want to avoid further debt, you might pay off your car loan with the extra money. However, after you have paid off your auto loan, you should make sure that you have adequate emergency reserves to handle any unexpected needs.
Conclusion
To summarize, there are various possibilities for selling a car with a loan, including dealerships and private buyers. However, you must be informed of your loan arrangement and your outstanding balance with the lender. It would be best if you ideally sold with positive equity to generate a profit. A negative value will require you to pay more than you earn from the sale or trade-in of your car. You must settle the loan balance to obtain the car’s title regardless of your decision. Transferring the loan is the only way to transfer ownership of a vehicle without worrying about the payoff amount, but you should not expect to make a profit by doing so.
FAQs
Yes, you can sell your car even if you have a loan on it. However, before you can transfer ownership of the car to the buyer, you must first pay off the remaining balance.
There are a number of strategies for determining the worth of your vehicle, including the use of internet valuation tools, a search of local ads for comparable cars, and a professional evaluation.
The time it takes to sell a car with a loan relies on a number of factors, including the demand for your vehicle, the price you’re asking, and your marketing efforts. On average, selling a car with a loan might take anywhere from a few days to a few weeks.
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Read more: Funds & Loans
Source: Forbes