How to Sell a Car with a Loan

Instead of paying cash when you want to buy a new car, you can decide to finance it with a loan. A lien is another name for a car loan. It is a contract between you and the lender that specifies that you will make regular payments up until the loan is paid off in full.

While you are making payments, the lender, commonly known as a lien holder, officially owns the car. The lien is removed from the title and you are given legal ownership of the car only when you have paid off the loan in full.

However, there are several circumstances in which you might want to sell your car before the loan is fully paid. In such situations, it’s not bad to sell the car but there are certain things you must know. 

In this article, I mentioned helpful tips on how to sell your car with a Loan, how to sell your car with a Loan and also other options apart from selling your car with a Loan. Sit back, and let us get right into it. 

Can You Sell a Car With a Loan Already in Place?

Yes. If done properly, selling a car with a loan on it is not against the law and has no repercussions. But before you can legitimately sell the car to another buyer, a crucial condition must be met – which is; you must fully repay the debt and remove the lender from the title and ownership of the car.

It’s far simpler to sell a car you own than it is to sell one with a loan. However, if you are willing to pay the necessary expenses, it is certainly possible.

Here are 5 actions you must take in order to sell a car with a loan;

5 Actions to Selling a Car with a Loan.

When selling a car with a loan, there are several things you need to know and a few actions you should take when selling a car that has a loan. They are;

1. Determine the value of your car.

The first step to selling a car with a loan is to determine the value of the car. You can do this by searching for the make and model on websites like Kelley Blue Book, Edmunds, or NADA. They are all reputable sources for finding the current private sale value of your vehicle.

In most cases, selling your car privately will net you a higher price than trading it in at a dealership. The results of the online search will be helpful as a guide.

2. Determine your payment amount

Before the title and ownership may be released, you must pay off any outstanding loans. However, the total amount due is greater than just the unpaid sum on your account.

The total amount owing to the lender is included in the payment amount because interest accumulates over time. You can get an estimate of your payoff balance from your loan company.

3. Calculate your equity by subtracting the loan amount from the amount of the car.

If the amount is higher, that means you have equity in your car, also known as Positive Equity;
For example, if the amount of the car is $20,000 and the loan amount is $15,000 that means you have
Positive Equity.

But if the amount is negative, you have a negative equity on your car loan, which means you owe more money than the car is now worth. For example, the car is worth $20,000 and the loan amount is $25,000 which means you have an extra $5,000 to balance up.

When you sell a car with negative equity, you must give the lender the proceeds of the sale plus the negative equity.

4. Getting ready for the transaction

The process to sell your car normally comprises you, the buyer, and the loan officer who will carry out the procedure and sign over the title to the buyer, regardless of whether you have positive or negative equity. Ask your lender what you and the seller will need to submit, such as the necessary papers and funds for the sale, before this meeting to ensure that the transaction goes as smoothly as possible.

The buyer will next proceed to their local DMV to obtain a new registration and title for the vehicle after bringing the signed title and other necessary documentation.

5. Settle the debt by paying off the loan.

The best course of action is to pay off your debt before selling the car, if at all possible. With a clean title in hand, you may simply sign it off to the buyer. You’ll have an easier time selling the car because purchasers will find this to be the most enticing. Some purchasers could be wary of buying if they want to sell a financed car without paying it off because obtaining the title will be difficult.

Selling through a Car Dealer, Lien, or Order Sale Details.

– Sell through a car dealer

The best choice is to sell the car to a dealer if you intend to trade it in for another vehicle. This is how it goes: The dealer will either add the payoff amount to the new auto loan when you purchase a new car from them, or they will use the trade-in revenues to pay off your current loan. To change the title from the lienholder’s name to the car dealer’s, the dealer will cooperate with your lender.

The dealer will handle all the calculations and work with your loan provider to set up the title transfer.

– Sell your car with a lien privately

Selling your car to a private buyer is the other choice. The sales procedure in this instance is the same as it is for any other car. Locate the buyer, show him the car, and come to a price. However, you must settle the loan and arrange the sale before you can grant them the title.

– Order sale details

You cannot lawfully transfer the title if you are selling your car to a third party without first paying off the debt. The quickest and simplest way to accomplish this is to pay off the loan, remove the debt, and transfer the title to the buyer by going to your lender’s office with the buyer. In most cases, the transaction and title transfer can be done in a single visit.

The buyer could also repay the debt as an alternative. The majority of creditors will take the title of the car in exchange for a buyer’s check for the settlement sum. To finish the settlement process, you must go to the lender’s office with the buyer.

– Think about a security deposit.

Try opening an escrow account if you or the buyer don’t reside close to the loan office and are unable to finish the transfer process in person. Both parties are guaranteed, through the use of an escrow account, that payment will be made in a timely manner following the release of the lien.

When there are contractual obligations that must be upheld before the sale can be concluded, an escrow is frequently used.

It costs money to use an escrow account, either in the form of a fixed charge or a percentage of the total sales price. However, because the account offers both the buyer and the seller financial security, the cost is typically paid evenly between the two parties.

Other Options Apart from Selling Your Car

In the event that you do not want to sell your car, there are a few alternatives you can take.

1. Ask your lender for help

The first person you should be in a situation like this should be your lender because he/she controls the title to your car. Deep down, they are also hoping the negotiation goes well for both themselves as the lienholder on the car and for you, their customer. Your lender can assist you in obtaining your payback sum, navigating the procedures for selling to a private buyer, or determining the interest rate you are eligible for should you choose to trade in your current car for a new or used one.

2. Refinance your car loan

You can refinance the loan and get a lower interest rate. This will allow you to pay off the loan quicker and save money in the long run. .A lower interest rate can also save you money on the total cost of the loan. .Most lenders will allow you to refinance your loan if the current loan has been in effect for a certain amount of time. When refinancing, you might qualify for a lower interest rate and reduced monthly payments.

3. Use Your Savings

You can think about paying off your auto loan with your excess money if you have a substantial savings account and want to avoid taking on additional debt. After paying off your car loan, make sure you have adequate emergency funds saved up to meet any unforeseen costs.


To sum up, if you want to sell your car to a private buyer or give it to a dealer to purchase a new one, you will need to be aware of how much you still owe on your loan, whether it is greater or lower than the amount you can recoup by selling the car, as well as the procedures your lender requires you to follow.

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