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How To Sell A Car With A Loan In 2023

A few years back, you decided to take out an auto loan for a car. Now, plans have changed, and you need to sell the vehicle.

You might be thinking of getting a new one, downsizing to a more cost-effective one, or maybe you don’t want a car anymore.

Either way, selling a financed car can be challenging, especially if you have negative equity or owe more than the car’s value.

If you’re wondering how to sell a car with a loan, the process involves gathering documents, information, and payment.

You’ll want to calculate the car’s value, estimate its payoff amount, and determine how you’ll sell it.

Why You Should Consider Selling a Car With a Loan

The process of selling a car tends to be drawn out, but the benefits are worth it.

  • Relieved of Car Loan: Selling a financed car will relieve you of the loan burden since the buyer will likely pay it off.
  • Positive Equity: If you have positive equity on the sale, you’ll walk away with a profit margin.
  • Upgrade Car: After selling your financed car, you can purchase a newer model with more attractive features, such as cruise control.
  • Downsize Car: Rather than upgrade the model, you can find a cost-effective option that won’t suck up as much mileage.

Problems With Selling a Car With a Loan

Selling a car with a lien requires more effort and involves several cons. Some of which include reduced profit and extended paperwork.

  • Reduced Profit: You won’t get as much money selling a financed car as you would with one without.
  • Time-Consuming: Selling a financed car is more time-consuming since you have to deal with the buyer and lender.
  • Upside Down Car Loan: You may accumulate negative equity, where you owe more than the car’s value.
  • Extended Paperwork: The process will require a trip to the DMV for the necessary paperwork, such as a Bill of Sale and title transfer.

What You’ll Need to Sell a Car With a Loan

Before listing your financed car for sale, you’ll want to gather some necessary information and documents.

  • Car Title: Transferring the car title to its new owner is essential. Getting the title involves paying off the auto loan or heading to a dealer for a trade-in.
  • Loan Payment: If you sell your car privately, cover the outstanding loan expenses.
  • Car Valuation: Getting an estimate of your car’s worth will allow you to determine the best price you can list your vehicle for.
  • Car Equity: The equity amount you possess over your car will identify whether you have positive or negative equity. For instance, if the car’s loans are between $3,000 to $7,000 and its value is worth $15,000, it’s positive equity and vice versa.
  • Paperwork: Selling a car involves several forms of paperwork, such as the Bill of Sale, warranty documents, and owner’s manual.

Where to Sell a Car With a Loan

You can sell a car with a loan using various websites and formats. Three of the best options are Craigslist, eBay Motors, and Autotrader.

1. Craigslist

A homepage of the craigslist screenshot

Craigslist is a widely-used platform for listing all sorts of things, from services and jobs to housing options and appliances.

What Makes This Option Great

Craigslist is ideal for selling your car since you only have to pay $5 to list. It’ll offer you a better profit compared to approaching a car dealership.

You can find a potential private buyer through the platform and schedule a meet-up. You’ll want to take extra precautions since you won’t get much information about the buyer. In turn, find a public place like a mall parking lot to meet in.

  • Fees/Commission: $5 Listing Fee
  • Payment Methods: Cash or Check

2. CarGurus

A screenshot of the car gurus homepage

CarGurus is a website dedicated to people who want to buy or sell a car. It also provides helpful resources to aid you through the process, such as a loan calculator and test drive reviews.

What Makes This Option Great

The platform offers a helpful pricing guide for sellers. A fair valuation will increase your chances of a sale. Another plus with CarGurus is that you can opt for a pick-up option if you’re selling the car to a dealership.

  • Fees/Commission: $99 if the buyer pays through AutoPay and a $4.95 listing fee applicable for 30 days
  • Payment Methods: Bank Transfer, AutoPay, or Cash

3. eBay Motors

A screenshot of the ebay motors homepage

eBay Motors is an extended platform of the giant online retailer eBay.

What Makes This Option Great

One of the unique points eBay Motors offers is that you can auction your vehicle and sell it for a fixed price. The option allows you to list an asking price for the car, and buyers bid until you find the highest value.

eBay Motors also services a free vehicle history report for your listing. It applies if you’re selling less than seven cars per year.

  • Fees/Commission: $19 to $79 Listing Fee depending on car price
  • Payment Methods: PayPal, Bank Transfer, Credit Card, Checks, and Money orders

How to Sell a Car With a Loan: Step-By-Step Instructions

When selling a car with a loan, you’ll have two choices. You either complete a private party transaction or sell it to a car dealer.

In the first case, you should cover the payoff amount to complete a title transfer. Otherwise, you may face issues, especially if you signed an auto loan with pledge collateral.

Step 1: Calculate Your Car’s Worth

Before deciding to sell your financed car, you need to find its valuation. That way, you’ll get a clearer picture of your debt-to-equity ratio.

You can evaluate your car’s worth through online resources like Kelley Blue Book and Carvana. Enter your vehicle’s make, model, year, condition, and license plate, and the site can generate an approximate value.

Step 2: Estimate the Payoff Amount

The payoff amount evaluates the amount you need to cover the existing loan. It includes the outstanding loan amount, interest rate, and other fees.

You can get the payoff amount by asking your lender for it. After paying it, you’ll receive ownership of your vehicle and can sell it privately. That said, you can determine whether you have positive or negative equity.

Private Equity

Private equity occurs when your car’s loan payment is less than its value. In this case, you can sell your car privately by going to the lender with the buyer to complete the vehicle transaction.

You can also complete the process online by receiving the buyer’s sale payment and transferring it to the lender. The latter will then email the buyer the ownership title.

Negative Equity

You have negative equity if you owe more than the car’s value. In this case, you’ll have to cover the difference between the sale and loan amount from your savings.

Another option involves waiting until you gain positive equity after a few more months of loan coverage.

Step 3: Determine How You’ll Pay Off the Loan and Complete Sale

After getting an estimated payoff, it’s time to decide whether you’ll sell the car to a private buyer or trade with a car dealer.

Option #1: Selling Privately

Selling privately means you’ll need to receive ownership and pay off your auto loan. You can do so with a few different methods.

Use Sale Money

You can sell the car and use the amount to pay off the loan. The straightforward method is well-suited if you’re looking for a quick getaway from an outstanding loan.

It requires transparency on your part towards the buyer. You should let them know you’re selling a financed vehicle and using the amount to pay off the loan.

We suggest going through this method only if you have positive equity. Otherwise, negative equity will only cost you more.

Refinance Your Loan

Refinancing your car loans can grant you lower interest rates, depending on the economic condition. The lower interest rate lowers your monthly payment bills and saves you more money.

You can find other options that decrease your monthly payment but lengthen the loan payment period.

Other Methods

You can check your savings and see if the amount can cover the loan. Another method involves using a low-interest credit card that’ll ease the burden.

Opting for an additional loan is a viable option as well. You can go through a loan amortization to keep an organized monthly payment plan to cover the loan payment.

Option #2: Trade-in to a Dealer

Rather than sell privately and complete most of the paperwork, you can take your business to a dealer. They’ll do most of the work, but you likely won’t receive as much profit from this option.

With positive equity, the dealer will move the extra credit toward your new car loan. Negative equity complicates things since you’ll have to lump your old loan with the new one. You can opt for the latter if you need a new car.

Besides that, you can do a trade-in for your car to a dealer through a platform. You’ll complete the same steps as you would with a dealership.

Things to Consider When Selling a Car With a Loan

Selling a car with a loan requires careful consideration and preparation. You should compile these items, from car equity calculations to paperwork, for a smoother process.

1. Calculate Car Equity

Subtract your car’s worth from your outstanding loan amount to calculate your car’s equity. Your equity will determine whether you should wait to sell in case of an upside-down car loan or list it and use the sale amount to pay off the loan.

2. Prepare Necessary Paperwork

When completing the sale transaction, you’ll likely head to your lender with the buyer. Before going, ask the lender what paperwork to get.

Once provided and payments are done, the new owner will take the documents to the DMV to create a new registration and title ownership for the car.

3. Find Accurate Valuation

Finding an accurate valuation for your vehicle requires active market research. The used car industry is expanding, reaching over $195.84 billion in 2021. In turn, make sure to use credible resources to estimate your car’s worth.

Frequently Asked Questions

Does Selling a Financed Car Hurt Your Credit?

Selling a financed car can negatively affect your credit. After paying off your auto loan, you close the credit account, automatically dropping your score.

Accumulating a mix of credit accounts impacts over 10% of your score since it showcases your ability to manage multiple kinds of debt.

Can a Car Dealer Sell a Car With Outstanding Finance?

Selling a car with outstanding finances without the owner’s knowledge is illegal. For this reason, the dealer needs to settle the finance before listing the car to potential buyers.

Similar Tutorials to Check Out

After learning how to sell a car with a loan, you’ll want to know other car-selling how-tos to expand your industry knowledge.

  • How to Sell a Car Privately: Selling a car privately will reap the most monetary benefits, but it tends to be the most time-consuming.
  • How to Sell Junk Cars: If you have a junk car lying around that’ll cost too much to fix, you might as well sell it and use the amount for your next car purchase.
  • How to Sell Used Tires: Used tires still hold value to companies that can repurpose them into other rubber products.

Wrapping Up

Selling a car with a loan doesn’t only require finances and estimations but transparency as well. The lender should be aware of your plans. They might change the terms to make you pay off the loan faster.

That said, let us know if you have any questions in the comments. Overall, the selling process requires patience, whether you’re going the private or dealer trade-in route.

Once you pay off the loan and complete your sale, you’ll feel the weight of one loan lifted off your shoulders.

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