It’s possible to sell a car that still has a loan on it, but there are few things to keep in mind. Generally, you have to pay off the loan before you transfer ownership to someone else. But there are a few ways to speed up that process.
Yes, you can sell a financed car. But as long as the loan exists, the lender has a lien on the car. This means if you default on your payments or fail to pay off your loan, the lender can repossess the car, even if you sold it to someone else. This can make it much more difficult to find a buyer since most people won’t want a car that could be repossessed. Buyers will check first whether a used car has a loan on it before buying. That’s why it’s best to pay off your car loan before selling.
You have three main options if you want to know how to sell a financed car without paying it off in Canada. With all three options, you eventually must pay off your loan, but how you do so will be different.
Finder data suggests that men aged 25-34 are most likely to be researching this topic.
| Response | Male (%) | Female (%) |
|---|---|---|
| 65+ | 2.88% | 1.41% |
| 55-64 | 4.14% | 3.27% |
| 45-54 | 9.87% | 4.83% |
| 35-44 | 14.79% | 6.72% |
| 25-34 | 20.91% | 10.89% |
| 18-24 | 13.26% | 7.05% |
Selling your financed car online is the most hassle-free method out of all three options because it’s quick and you won’t have to leave your home. Online dealers (also known as “online car retailers”) and bidding sites are the two ways to sell a financed car online.
Online dealers allow you to sell a financed car completely online. To start, go to the online dealer’s site to see your offer within minutes by providing the year, make and model of your car. A representative will go to your home to appraise your car and take it off your hands if you want to proceed with the sale. You will have to provide government-issued ID and the vehicle registration.
Any leftover balance in your car loan will be deducted from your offer, and the online dealer will take care of the payout.
Similar to online dealers, an online bidding site allows you to get a quick offer online for your financed car and have it appraised and picked up from your home. The big difference is that an online bidding site is a platform that lets multiple dealers bid for your car. Once you accept an offer, the bidding site will take care of the payout of your car loan. Examples of bidding sites in Canada include MintList and Autozen.
To sell a financed car to a private individual, you can sell the car and use the profit to pay off your loan, or you can use your savings or other credit options to pay off the outstanding balance first.
This is one way to sell a financed car when money’s tight, but you’ll need to earn the buyer’s trust for them to give you their money so that you can pay off the loan.
You can figure out how much your car is worth by getting it appraised by a mechanic. You can also get a ballpark idea from websites like Canadian Black Book, Auto Trader Canada, and Kijiji Autos. Also consider making repairs or having your car detailed so you can up the price — or at the very least give it a good wash. The more you’re able to sell it for, the more you’ll save.
Pay off your financed car with your own savings before selling it to eliminate debt altogether. Alternatively, if you can get lower rates than what your car loan has, you can use a low-interest credit card, personal loan or debt consolidation loan to pay off your remaining balance.
Similar to online dealers and bidding sites, an in-person dealership can buy your car that is still being financed and take care of the payout. However, getting an offer may take longer, and you’ll need to drive to its location so your car can get appraised.
Below are three options you can consider at the dealership if you’re looking to sell your financed car.
If your car is less than five years old and in good condition, you could get a reasonable trade-in offer at a dealership. You can use that cash to pay off your existing car loan, then buy a new car elsewhere or spend the remaining cash as you like.
If you want to upgrade your car, many dealerships will incorporate the terms of your loan into a trade-in deal — especially if it’s the same dealership you used for your first car. Remember, though, that this doesn’t make your car loan disappear; it merely rolls it into your next car loan (although the dealer might give you a discount for giving them your business).
You can also downgrade your car if you’re looking for something more cost-effective and want more money in your pocket after the trade. This might be a better option if you owe more than your car is worth (also known as having negative equity).
Your lender will likely know what you need to do to pay off and sell your financed car if you’re not sure which option is best for you. Lenders have worked with many borrowers in this situation before and have an idea of what your best options are. You may even be able to renegotiate the terms of the loan in order to make it more affordable to keep your car. However, if your current lender is not willing to refinance your car loan, you’ll need to switch to a different one.
If your primary reason for selling your financed car is affordability, you may wish to consider refinancing first. Refinancing your car loan involves trading in your loan for another one that has better rates and/or terms. You could save money by switching to a different lender with lower rates or longer terms to reduce your monthly payments.
If you want to sell a financed car, first gather together the following information to help the process go smoothly.
Learn more about the difference between positive and negative equity below:
Follow these steps before selling a car with a lien:
Here are three factors to think about before selling a car that has a lien on it:
It depends on your exact financial situation, but in general, selling a financed car will likely hurt your credit a little. The reason why your credit score could go down when you sell a car is because when you pay off your car loan, the loan account closes. Credit history on the whole contributes to 15% of your credit score. Your credit score may also go down a little if you then apply for a loan to buy a new car, since the finance company will have to do a hard credit check.
There are several websites in Canada where you can take charge of your own private sale and post adds to sell your vehicle even if it has a loan on it. Check out our full guide to the best sites to sell a used car online here. Here is a quick look at the top sites:
Kelly, a resident of Ontario, has $4,500 left owing on her loan when she decides to sell her car. She connects with a buyer who offers her $7,200 cash as long as she removes the lien on her car. Kelly invites the buyer to come with her to the bank so that she can pay off the car loan in front of him (which will remove the lien). She has to pay an early repayment fee on top of her loan amount and deposits the rest of the cash ($2,200) into her bank account.
| Amount owing on the car loan | $4,500.00 |
| Loan type | Auto loan (term loan) |
| Early repayment fee | $500.00 |
| Total amount owing | $5,000.00 |
| Amount deposited from the sale of the car | $7,200.00 |
| Total leftover after the car loan is fully paid | $2,200.00 |
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
Having a financed car doesn’t have to stop you from selling your car either in a private sale or to a dealership. You just need to be careful to pay off the loan before or during the sale. You can learn all about how car financing works by reading our guide to auto loans.
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