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Having a financed car means you’re the registered owner, but the lender holds the title until you finish paying it off. But just because you don’t own the title doesn’t mean you can’t sell it. In fact, selling your financed car is one of the fastest ways to get out of a car loan you signed.
So, how do you sell a car you are financing? You can either pay off the loan first, get the title and then sell the car, or sell it to someone willing to pay your auto lender directly to clear the loan. Here’s what you need to know to sell a car with a loan you’re still paying.
Learning how to sell your financed vehicle is key to getting the best outcome and avoiding complications. While it’s not as straightforward as selling a car you fully own, it’s completely doable, especially if you follow these steps:
If you're selling a car with a loan, you must inform your lender about it. Since the lender likely holds the title, selling the car without their consent could breach your loan agreement and may even be a legal violation.
Communicate your intent to sell by calling or visiting your auto lender and requesting your loan payoff amount. The lender will then provide a written payoff statement that shows how much you still owe, including applicable fees.
Next, research your car’s current value to determine a price range to sell it. This helps you set a fair asking price, negotiate confidently and avoid being lowballed by potential buyers.
You can use online valuation tools like Kelley Blue Book (KBB), Edmunds and JD Power to research your car’s current value. You'll need details about your vehicle, such as its make, model, mileage and condition, to get an estimate.
Calculating your equity is a crucial step in selling a car with a loan. If you have positive equity (your car is worth more than your loan debt), you can profit from selling your financed car. But if it’s negative equity (the car is worth less than what you owe), the sale won’t cover the full loan balance. In that case, you’ll need to pay out of pocket to clear the remaining debt or roll it into your next car loan.
To calculate your equity, subtract the loan payoff amount from your vehicle’s current value:
A result above zero means positive equity, while below zero means negative equity. For example, a car valued at $15,000 with a loan payoff amount of $10,000 would have positive equity of $5,000.
You’ll need to provide certain documents to the lender or buyer while selling your financed car. You should prepare what you can ahead of time to streamline the sale.
Documents for your lender may include:
Documents for the buyer may include:
Note that your lender won’t release the vehicle’s title until you’ve fully paid off your loan.
Now that you have the car’s value, necessary documents and lender’s consent, let the world know it’s for sale. Advertising online is the easiest and fastest way to reach more potential buyers. Top websites for car sales include Autotrader, Cars.com and social media platforms like Facebook Marketplace.
Alternatively, use traditional channels like local newspapers or word of mouth through friends to spread the word about your car sale. Just remember to provide clear and accurate details about your car to attract the right prospects, such as its:
The final step in selling a car with a loan is accepting a buyer’s offer and completing the sale. Once you have a buyer, you’ll need to agree on who will pay the lender the loan payoff amount to clear the debt.
After receiving the payoff amount, the lender will release the vehicle title to you, the buyer or the Department of Motor Vehicles (DMV), depending on your state and their process. Next, sign a bill of sale and transfer the vehicle, title and other documents to the buyer to finalize the sale.
Selling your financed car might not be your best move if you owe more than you could make with a sale. If selling won’t work, consider pursuing alternatives like trading in or refinancing to achieve your goals.
Trading in is most convenient if you want to change cars. It involves taking your current car to a dealership where they’ll appraise it. The dealership will then take your car in exchange for the new one and deduct its value from the price of the new vehicle. This reduces the amount you need to finance or pay upfront for the purchase.
Trading in typically takes less time and effort because the dealership handles the paperwork and pays off the loan on your old car. If you have negative equity, the dealer can roll the shortfall into your next auto loan.
If your primary goal is to get out of a loan with a high interest rate or monthly payments you can no longer afford, auto loan refinancing may be an option. Refinancing lets you keep your car but replace your current loan with one that has a better interest rate or lower monthly payments.
You’re more likely to qualify for improved loan terms if you have good credit and a track record of paying your current loan on time. It’s a smart move if you want to keep your current car, either because you like it or still owe more than it’s worth. You may prefer to refinance before trading in later down the line.
If you're planning to sell your financed vehicle, confirm your car’s value, as it will determine whether you have positive equity and how much you can sell it for. Would you like to raise your car’s value? Making minor repairs, repainting, cleaning and ensuring all maintenance is up to date can help. Remember to communicate with your lender throughout the process.
Visit our blog for more expert tips on refinancing, auto loans and other car money matters.
Here are our answers to common questions about selling a car with a loan:
Yes, you can sell a financed car if your lender consents. You’ll need to pay off any remaining loan balance to get the vehicle’s title and transfer ownership to the buyer.
You can’t sell a financed car and transfer the title to the buyer without first paying off the loan. You can pay off the loan yourself or have the buyer pay off the lender directly.
You don’t need to refinance before selling unless the vehicle has negative equity. In that case, refinancing may buy you time to build equity before selling. But if you’re close to the end of your loan and have a good offer, refinancing before selling is unnecessary.
First, notify your lender of your intent to sell. Next, research your vehicle’s value, calculate your equity and advertise the car with clear pricing and details. Once you have a buyer, pay off the remaining loan, finalize the sale and transfer the title to the buyer.
Not necessarily. Instead of paying off the loan before selling, you can use the proceeds from the sale to pay it off. Alternatively, you could have the buyer settle the loan as part of the sale agreement.
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