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Is it possible to sell a loan car?

When you buy a car with money, you are not the owner of the car. At least not yet. This is because until you pay the full cost of the car, your lender is the rightful owner of the car.

But what if you decide you don’t need your car, or that you want a new car, before you’ve paid the cost of the car? Are you stuck with a car you don’t need?

Not at all. You just need to make sure you are taking the right steps.

Here’s how to sell a car financially.

1. Find out the real value of your car

Selling any vehicle should start with getting a reasonable estimate of its value. Kelly Blue Book and Edmunds.com are two trusted sources for car valuation. In fact, you should get ratings from both sites.

Enter as many details about the car as you can to get the most accurate quote. You should focus on the “private party” as this is the sales path you will take. They also provide “trade” if you want to go that route, and “dealer retail” which doesn’t apply since you’re not a car dealer.

Source: kbb.com

2. Get the balance of the loan payment

Contact the lender holding your car loan and ask for the repayment balance or estimated amount. (Note: this will be slightly different from the balance on your most recent statement, as interest is calculated daily.)

Then compare the loan balance with the appraised value of the car. This will tell you if the car is worth enough to pay off the loan and will let you walk away with cash, or if you need to write a check when you sell the car to pay off the loan.

This is an important step – if you determine that the likely selling price of the car will not be enough to pay off the loan and/or provide you with enough cash to make a down payment on the next car you want to buy, you will have to come up with that money, or you won’t. you can sell the car. But you want to know this before accepting an offer from a buyer.

Read more: What should be the down payment for the car?

3. Get your lender involved in the sale

Once you know the car loan payment and decide to proceed with the sale, you must involve the lender in the sale process. They own the car and you can’t sell the car without it.

Ask your car lender what is the best way to proceed so that you can pay off the loan and transfer ownership to the buyer in the shortest possible time. This is not uncommon, so the lender must have procedures in place.

Read more: Can you pay off a car loan early?

4. If you can, run a sale at the bank that holds your loan.

The easiest way to handle the sale of a loaned car is to make the sale to the lender’s physical address. This will give you the opportunity to receive funds from the buyer, pay off the bank loan and transfer ownership to the new owner.

Conducting a sale in a credit institution has other advantages:

  1. It is a neutral platform for sales.
  2. This gives the sale a more formal tone than if you were doing it in your driveway.
  3. Any documents you may need from a lender will be immediately available.
  4. You can ask the lender’s staff to make copies or notarize any required documents.

This is the best way to go if your loan is from a local bank or credit union. Unfortunately, many car dealership loans come from large national banks such as Chase, Capital One, or automaker finance divisions (such as Toyota Motor Credit). This makes selling your car with an outstanding loan balance a little more difficult, but not impossible.

How to deal with an out-of-state lender

If the lender is not local, you will need to bring the bill of sale for the vehicle to your state Department of Motor Vehicles. You will want to obtain a temporary operating permit for the buyer. This will allow you to hand over the vehicle to the buyer and then transfer clear ownership to the buyer once the loan is repaid.

Obviously, you will not have a title until the loan is fully repaid, so there will be a delay of a few days for this process to be completed. You may have to pay your lender a fee to expedite title processing, a process that usually takes several weeks.

The risk of this delay will be a problem for the buyer in the first place, since he will have a vehicle without title. However, there is no easier way to complete the sale if you don’t have the personal funds to pay off your car loan before selling the car.

Read more: How much should I spend on a car?

5. Accept only cash or an official bank check.

Never accept a personal check from the buyer for full or partial payment of the sale price. The personal check can be returned, in which case the buyer will have both the cash and your car.

For this reason, only cash or bank check should be accepted for payment. A bank check or cashier’s check is issued by the bank itself. To be especially careful, insist on going to the bank with the buyer to get an official check so you know it’s legit – there’s a Craigslist scam in which buyers hand over fake bank checks that are undetectable until they’re returned .

Closing legal matters

Remember that you can’t legally sell something that doesn’t belong to you, which means you’ll need to notify your lender before you can sell your financed vehicle and you’ll need to make sure the settlement amount is paid. If you don’t, your creditor may sue you for breach of contract.

But besides this, there are other legal aspects of selling a car. I recommend obtaining a list of specific requirements in your state from the Department of Motor Vehicles. And be sure to follow these requirements literally.

Some of the documents you should have prepared include (but are not limited to) the following:

  • Purchase. This is a simple document that will indicate the parties to the transaction, as well as specific details, including the date, price and description of the property transferred. It must include the identification number of the vehicle being sold, as well as the odometer reading as of the date of sale.
  • Release from liability. You can usually download these forms from the DMV website in your state. This will confirm the handover of the vehicle and release you, the seller, from future liability. The form must include an odometer reading and must be filed with the DMV immediately so that there is an official record of the transfer.
  • Cancel car insurance. And while you’re at it, ask the buyer to provide proof of car insurance coverage as well. This will make it clear that the buyer takes responsibility for the vehicle.
  • Remove and save license plates. Not only will this reduce your liability after the sale, but it will also save you money by transferring license plates to the next car you buy.
  • Pay any fees associated with the sale. Your state DMV will be able to tell you what fees are required in connection with the sale of your vehicle. Various fees may apply, including sales tax, which you will have to charge on top of the vehicle’s final sale price.

Finally, make sure the registration on the vehicle is valid. If this is not the case, it can lead to post-sale problems, including the payment of late fees.

bottom line

Selling a car that you still owe money for is possible, but requires some extra steps to keep it legal. Be sure to notify your lender of your intention to sell and receive the repayment amount in writing. Once you have this figure, you can advertise the car for sale and screen potential buyers.

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