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How To Sell A Car With A Loan

Selling a car with an outstanding loan on it isn’t particularly difficult. It does, however, add a few extra steps and a little more time onto the entire process.

If there’s a loan on your car, the lender (or lienholder) is technically a part owner of the vehicle. The lienholder’s may hold onto the title or list their name on it. In these instances, you cannot sell the vehicle or transfer the title to a new owner without approval from the lender (which typically entails them getting paid for the loan).

When selling a car with a loan, there a several steps for you to take in order for the process to go as smoothly as possible:

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Step 1: Figure out what your car is worth. Utilizing a vehicle valuation site that requires your car’s year, make, model, condition, and location will help you get an estimate for what your car’s value is.

Step 2: Figure out what’s left to pay off on your loan. Reach out to your lender and find out the current balance on your loan. The payoff amount will include (in addition to the outstanding loan amount) interest up to a given date and any fees and they’re typically good for up to 10 days.

Step 3: Clearly define your equity. Depending on the value of your payoff amount and the difference between it and your car’s value, you could either have Positive or Negative equity.

Step 4: Discuss your vehicle sale with your lender. You’ll want to consult with your lender prior to listing your car for sale in order to understand your equity and payoff requirements.

Selling With Positive Equity

Selling a car with positive equity means the sales price or trade-in value is greater than what is still owed on the loan. Essentially, you’re either walking away with cash in your pocket or applying that positive equity to a new car loan. Either outcome puts you in a good position.If the car has a loan on it at the time of sale, you’ll have to use your proceeds to pay off the outstanding balance and take care of the title transfer process.

Buying through a dealer streamlines this process as they typically take care of that for you. Selling your vehicle to a private buyer, however, will force you to pay the loan balance yourself.

Using a personal loan to pay off the car loan before the sale makes the process easier. You’ll have the title in hand and can then use the proceeds to pay off the personal loan.

Sell car with loan

Selling With Negative Equity

Selling a car with negative equity (otherwise known as being “underwater” or “upside-down” on your loan) is a little more complex. Not only will the proceeds from the vehicle’s sale go to the lender, but you’ll also end up paying more money to cover the amount of your negative equity.

When dealing with negative equity, you’ve got a few options to sell your car and pay the outstanding debt:

  • Out of Pocket - Based upon how much negative equity you have, it may be possible to pay for it out of your own finances.
  • Lender Options - Discuss your options with your auto loan lender or even another bank/credit union. There may be an opportunity for you to refinance your auto loan before selling.
  • Delay the Sale - One way to get out from being underwater on your loan is to make more payments until you have positive equity. Keep it in great condition and the mileage low and your car’s value will get a bump upwards.
  • Sell Privately - The previous options primarily concern selling to a dealership. You may be able to net a significantly higher purchase price from a private buyer than you would a dealership.
  • Roll It! - You can roll the negative equity into the next car loan. This is a last resort as it will immediately put you underwater on a new loan with a monthly payment higher than what it would normally be.

Risk Factors Of Selling A Car With Negative Equity

As stated, you can sell a car with negative equity. However, the risks lie within rolled over negative equity instantly puts you underwater with your new loan. You’ll end up borrowing more money on your next auto loan than your car is actually worth.

A larger loan amount means you’ll likely have to pay more interest as well as the potential to be required to pay both outstanding loans simultaneously. It’s best to confirm beforehand whether or not you’re required to and being clear on the loan terms.

CarBrain cannot buy cars with negative equity and/or rollover loans. Buying those cars puts us in a position of responsibility for that loan, which is a massive loss on the car purchased. It is, generally speaking, a bad idea for anyone to purchase a vehicle that is currently underwater on its loan.

When Should You Sell A Car With A Loan?

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It’s best to sell a car when the loan itself has been paid down. Selling a car that is paid off is a transaction that results in zero additional debt for you.

If you fail to pay off your loan before selling your car, then the loan will be rolled into your next car’s payment. Ultimately, you have to repay your lender in some way, shape, or form.

Does CarBrain Buy Cars With Loans?

CarBrain can only purchase vehicles with liens under specific circumstances. However, our customer service representatives can provide you with a quote and help you figure out if you can sell your car with a loan to CarBrain. It’s a simple process:

Step 1: Take a few photos of your car and write down its VIN. Next, upload those photos and VIN to CarBrain and wait 90 seconds. That’s all! You’ll receive a quote that’s good for seven days, giving you time to prepare your vehicle, ask questions, or even shop for a new car!

Step 2: Schedule your pickup once you accept our quote. Towing and title transfer are always covered by us, and towing is scheduled at your convenience. In fact, a driver can pick up your car within 24-48 hours if you’re ready!

Step 3: Complete the sale! All you’ll do when the tow truck arrives is sign over your title, hand over your keys, and take your check. Selling your car in under a week and for the best possible price, all from the comfort of your own home ensures you’ll be in the best possible position to purchase your next car and get back on the road.

Contact CarBrain today and let us help you get a handle on your car with outstanding loans!

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Frequently Asked Questions

What is the best way to sell a financed car?

The best way to sell a financed car is when you have a positive equity on the vehicle. When your equity is positive, your vehicle is valued more than the payoff amount.

Does selling a car with a loan hurt your credit?

Selling your car with an outstanding loan on it does not hurt your credit. As long as your payments are on time, your credit will remain unaffected. A repossession and/or late/missed auto loan payments will affect your credit score and history.
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