If you’re a car enthusiast, you can vouch for the intricacies involved in the sale of a car. It’s undoubtedly easier to sell a vehicle that you own yourself, but the process becomes trickier if you still owe some money on it. This makes people ask questions like “can you sell a car on finance,” or “is it legal to sell a financed car to a private buyer?”
The procedure may be complex, but it’s not impossible. You just need to follow a series of steps and your sale can be seamless. So, if you’re contemplating how to sell a car with a loan, here is a concise guide that will take you through the process, step by step.
Before jumping right into the manner of selling, it is important to note that this procedure may depend on several factors, including where your loan is held, and whether you’re selling a car with a loan to a dealership, or a private buyer.
Step 1: What is your payoff amount?
The best way to initiate the selling process is by starting to extract information about the loan. You can check with your lender to determine the amount you owe and to make it official, the lender must give you a payoff letter. In simple terms, a payoff letter is an authorized document that contains the relevant information required on how to sell a car with a loan. The document has the total payoff amount, a date by which this amount still stands, and proper instructions for completing the due payment.
Don’t get too surprised on seeing the big payoff amount- This number in the document also takes into account the interest you owe until you pay off your loan. Hence, the amount may differ from your current owing on the car.
Since you are in contact with the lender, your best bet would be to ask him/her for additional help in the process. For instance, you can ask them for suggestions on how to sell a car with a loan. Your lender may provide valuable insight, which will change the course of action for you. If you’re lucky, the lender might own a local office where you and the potential buyer can meet, resulting in a far smoother transaction. The main topics to ask include prepayment penalties and processing time for receiving the title after the vehicle’s lien has been released.
In all probability, you will not sell your car with the loan due. You will most likely close out the loan when selling or before and as soon as the amount has been paid, the title can be transferred to the buyer.
Step 2: Pay it off
If you want to avoid the complex process, the best alternative is to pay off the loan before selling the car. In this way, your process of selling will become way simpler than before, as a vast majority of buyers prefer to buy a loan-free car. Moreover, you won’t encounter any obstacles as the due amount would be paid off and the title can simply be signed and given to the buyer.
When paying off the loan, ensure the following conditions are met:
To pay the dues, you should first check the vehicle’s current worth in the market. Resources such as National Automobile Dealer’s Association Guides and the Kelley Blue Book will help you to determine the true worth of your car and thus, you’ll be able to negotiate a fair price.
While assessing the worth of your car, you may come to an unfortunate realization: The amount you owe is far greater than the car’s worth. If this happens to be the case with you, the best course of action is to delay the sale until you can pay off the full amount of the loan and achieve a positive equity position. However, you can proceed with the sale of money that can be arranged through other means.
If you don’t have the means to pay the loan and still want to continue with the sale, a good option is to consider borrowing via a low-interest loan with a short repayment term. Then, once the sale has been made, you can instantaneously pay off the loan with the cash received from the vehicle. For this purpose, you can look towards online lenders such as Lending Club and Prosper. If not online, then local banks and credit unions can also help in the process.
Step 3: A clear title is necessary
When you transfer the title to the buyer, your sale has been completed. Usually, at the time of transfer, you will be required to sign the back of the title, which indicates a transfer of ownership to the buyer. You will also have to give the buyer a bill of sale, which contains the seller’s contact numbers, sale date, total price, odometer reading, and an authentic signature of the buyer and seller. Although this is the general procedure, requirements may differ from state to state.
Buyers will probably not be interested in the purchase until a clear title is furbished. As the name suggests, a clear title is free of any claims. If you still have an amount due on the car, the title will not be clear. If you think you can sell a car on finance and that would convince the buyer, it won’t as the lienholder’s name be next to the title.
Selling to a dealership versus selling to a private buyer
If you’re selling a car with a loan to a dealership, you have several options to consider. As far as dealers are concerned, the process is comparatively more convenient. You can just trade-in your car as it is often much easier than selling to a person. Moreover, dealers can be easily found and they know the knack of getting work done. Hence, you won’t be required to do the extensive paperwork that is involved in the process. The best part about selling a car with a loan to a dealership is the time that is saved- most dealerships are quick and complete the trade within a day
The only drawback of selling to a dealer is the low return- you will probably get less for your car from a dealer, as compared to a private buyer. In addition, if you have negative equity on the car, the dealer may incorporate the equity into the new car loan. This debt can keep building up and if not paid on time, it can spiral out of control.
On the other hand, if you want to know more about how to sell a car with a loan to a private buyer, you’d be happy to learn about private buyers offering a better price. In such a situation, you can even sell the car without a title and the buyer can purchase it if he/she trusts you enough. Although this may pose risk, later on, it can all go well if the buyer is willing, and the process is fully documented.
The disadvantage of selling to a private buyer comes in the form of multiple agency visits that you may have to undertake, to complete the transfer. Hence, to ensure a seamless transfer of ownership, you may have to make a few visits, fill out numerous forms and applications to get the process going.
Can you sell a car on finance?
In some countries it is illegal to sell a car on finance, however, in the US you can easily do that. You can sell your car on finance easily to a private buyer or trading it with a different car from a dealer.
So, what do I do?
If you want to know how to sell a car with a loan, you must also do your research according to the state you live in, and the respective policies and procedures that must be followed. Please do your due diligence before making your decision. We hope the information highlighted above helps you in the process.
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