Selling A Car You Still Owe Money On – You can sell your car if you still owe money. But you must pay off the debt before you can transfer ownership of the car to the new owner. The process depends on whether you sell the car to a dealer or a private buyer.
You’ve been eyeing a shiny new car, but you still owe money on your current car. So, can you sell your car if you’re still paying for it?
Selling A Car You Still Owe Money On
Yes, you can sell your car if you still owe money, but you must pay off the debt before you can transfer ownership of the car to a new owner.
How To Get A Car Loan Like A Pro
You’re ready to buy a new car and give up your current one. There’s a catch, though: You still owe money on your car loan. What happens next depends on who buys your car.
If you trade in your car for a new one or sell it to a dealer, the car loan repayment process is handled by the dealer. When you pay for your new car (or apply for a new loan), the dealer pays off the balance of your old loan, usually by sending the money to your bank or credit union. If you trade in a car and the dealer values it for more than you owe, you can pocket the difference or spend the extra money on a new car.
When the car is traded in or sold to the dealer and the loan is paid off, the lender removes the lien on your car. With a lien, the lender owns your car and is its legal owner until the loan is repaid. This allows the lender to sell your car if you default on the loan.
The situation is somewhat more complicated if the exchange value is less than the debt. In this case, the dealer will typically “roll over” the amount owed on your current loan to the new car loan. This practically amortizes the previous loan.
Can You Privately Sell A Vehicle That You Still Owe Money On?
If you sell your car to a private buyer and are still in debt on it, the situation becomes even more complicated. You cannot transfer ownership to the buyer until the loan is paid off.
In a private sale, you can complete the sale at the location of the current lien holder (such as the bank or credit union where you got the car loan). This way, the loan can be settled with the buyer’s funds and ownership of the car can be immediately transferred to the buyer.
Another option is for the buyer to be responsible for their loan payments. However, many lenders do not allow this. And if the lender allows, the buyer must meet the lender’s requirements for a new loan, including a minimum credit score and maximum debt-to-income (DTI) ratio.
Whichever way you choose to sell your car, be sure to ask your lender about prepayment penalties, title transfer requirements, and other details.
How To Sell A Financed Car
When you sell a car and still owe on it, you need to think about whether you have positive or negative equity. Positive equity means you owe less than the car is worth based on its current market value, while negative equity means you owe more than the car is worth.
For example, if you owe $15,000 on your car loan, but the trade-in value is $17,500, you will have positive equity of $2,500 (trade-in value minus the loan balance).
If you sell a car to a dealer with positive equity, the dealer will usually take care of paying off the loan for you. If you sell a car with positive equity to a private buyer, you use the proceeds from the sale to pay off the loan and then pocket the difference.
Now, if you owe $17,500 on your car loan and the trade-in value is $15,000, you will be left with negative equity of $2,500 (the loan balance minus the trade-in value). This is also known as a “reverse” loan.
How To Sell A Financed Car That Is Not Paid Off
With positive equity on your side, selling your car can make a lot of financial sense. You can make more money selling your car to a private buyer than to a dealer, but the sales process is usually easier with a dealer. No matter who the buyer is, you will make money from the deal if you have positive equity.
What to do if you have negative equity? If you want, you can delay selling your car until your equity is positive. Or you could consider purchasing a cheaper car (if your dealer plans to roll over the balance of your first auto loan to a new loan) to mitigate some of the effects of your negative equity. Alternatively, you may want to consider selling the car to a private buyer rather than a dealership, as you may get a higher sales price that would offset the negative equity.
If you have a loaner car, check the loan agreement before trading in or selling it. Once you’ve decided how you’ll pay off your current loan, you may need to explore loan options for your new car. When researching loan options, check your credit score and credit report to see your financial situation.
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How To Trade In A Car That Is Not Paid Off
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Regardless of your reasons for wanting to sell your car with a loan, the good news is that it’s easier than you think!
How To Sell A Car You Still Owe Money On
Read below how easy it is to sell or trade in your car, even if you still have car loan debt.
Lately, we have seen many car owners looking to get out of their current loan. The monthly payments are too high for your current budget, or the interest rate is too high, or perhaps the car simply no longer fits your needs. Whatever the reason, some car owners in Ohio sometimes feel trapped
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