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How to sell a financed car

Compare 3 ways to sell a financed car with a lien on it.

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.

Can you sell a financed car?

Yes, you can sell a car with a loan on it. 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.

How to sell a car with a loan on it

You have 3 main options if you want to sell a car with a loan on it. With all 3 options, you still must pay off your loan, but the “how” will be different.

  1. Sell it to an online dealer or bidding site. Online dealers and bidding sites have sprung up in Canada in recent years to make selling a car as easy as possible, even if there’s a loan on it. Learn more below.
  2. Sell it to a private individual. You can either pay off the car loan first before selling it to a private buyer, or sell it first and use the profit to pay off your lender. Learn more below.
  3. Sell it to an in-person dealership. If your car has a loan on it, local dealerships near you will still be open to buying it. Learn more below.

Option 1: Sell your financed car online

Selling your financed car online is the most hassle-free method out of all 3 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 2 ways to sell a financed car online.

1. Online car retailers/dealers

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.

Get an offer for your financed car from an online car retailer

1 - 1 of 1
Name Product Max. Vehicle Age Mileage Range Free Pickup Vehicle Payment Link
Clutch Sell or Trade Your Car
2012 or newer
0-150,000km
From Halifax & Saskatoon only
eTransfer funds in 1 business day
Go to site
More Info
Sell or trade-in your car without the hassle. Upload basic information and get an instant offer. Get the vehicle picked up from your driveway.
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2. Online bidding site

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 Carity and Autozen.

Option 2: Sell a car with a loan on it to a private individual

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.

1. Sell your car and use the money to pay off the loan

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.

  • Be direct and honest. Let the buyer know you owe money on the car and that you’ll pay off the loan in full immediately after the transaction. For peace of mind, offer to bring the buyer to the bank or lender and clear the debt in front of them or get a CARFAX report to show the buyer that there is no longer an outstanding lien on the car.
  • Decide if it’s worth it. Look at how much you can sell the car for and how much it’ll cost to repay the loan fully — including any early repayment fees and other costs. This will give you an idea if you’re going to gain or lose money from the sale.

How much should I sell my car for?

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.

2. Use savings, another loan or a credit card to pay off the balance first

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.

  • Savings. Pay off your financed car with your own savings if you can afford it.
  • Low-interest credit card. Choose a credit card with a low- to no-interest promotional period but make sure you can meet minimum repayment requirements.
  • Low-interest personal loan. Use a low interest personal loan to pay off your existing car loan if you can get a rate that’s lower.
  • Debt consolidation loan. If you have high-interest debts that include your car loan and your finances have improved since accumulating these debts, you can get a debt consolidation loan with a lower rate to pay off what’s left of your car loan.

    Option 3: Sell a financed car to a traditional in-person dealership

    Similar to online dealers and bidding sites, an in-person dealership can buy your financed car 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 3 options you can consider at the dealership if you’re looking to sell your financed car.

    1. Trade in your car for cash

    If your car is less than 5 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.

    2. Upgrade to a new car

    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).

    3. Downgrade to a cheaper car

    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).

    Not sure how to sell your car with a loan on it? Ask your lender

    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.

    Refinancing your car loan

    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.

    • Can you find better loan terms? Calculate the difference between the fees and interest rates of your current loan with the fees and interest rates of any new loans you’re considering. Also take into account any additional fees you’ll be charged to close your old loan.
    • Will you actually save money? Do the math to figure out if you’ll actually save money before you refinance with a new loan or lender.

    Compare car loans for refinancing

    1 - 2 of 2
    Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
    Loans Canada Car Loans
    $500 - $35,000
    0% - 31.99%
    24 - 120 months
    300
    Min. income of $1,800 /month, 3+ months employed
    Compare rates from 60+ lenders.
    Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered. 0% APR for new cars only, used car rates start at 7.99%.
    Coast Capital Car Loan
    Varies
    Varies
    18 - 84 months
    650
    Able to service debt payment of $300/month
    Competitive rates and flexible terms.
    Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.
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    What information do I need to sell a financed car with a lien on it?

    If you want to sell a financed car, first gather together the following information to help the process go smoothly.

    • Payoff amount. This is the amount you need to pay to completely pay off your loan. You may also have to pay administration fees and early repayment fees (if your lender allows early repayment at all). You can ask your lender for a full breakdown of fees and for information about whether you can repay your loan early.
    • The title transfer process for your lender. Each lender might have a different process for transferring the title to the new buyer if you sell your car privately. You might need to coordinate with the new buyer’s lender to hand off the loan.
    • Your car’s current value. Get an estimate of your car’s current value by using tools on sites like Canadian Black Book, Auto Trader Canada, and Kijiji Autos to prepare for negotiations with your dealership or private buyer. Or, have it evaluated by an expert.
    • Your car’s equity. You can calculate this by subtracting the payoff amount from the car’s current value. If your car is worth less than the payoff amount, you have negative equity, which can make it difficult to sell with a loan.

    Selling a car with positive vs. negative equity

    Learn more about the difference between positive and negative equity below:

    • Positive equity. Selling a car with positive equity means that your car is worth more than what you owe on it. For example, if you owe $10,000 but your car is worth $15,000, then you have a positive equity of $5,000. This means you can pay your loan off and have $5,000 left over. Having positive equity makes it easier to sell a financed car.
    • Negative equity. Selling a car with negative equity means you owe more than your car is worth. For example, if you owe $15,000 on your car but the sale price has depreciated to $13,000, then you have a negative equity of $2,000. This means you’ll still owe $2,000 to your lender after you sell your car and use the money to pay off your loan. Having negative equity makes it harder to sell a financed car.

    Take these steps before selling a car with a loan on it

    Follow these steps before selling a car with a lien:

    1. Weigh your selling options. Decide whether you want to sell to an online car retailer, bidding site, dealership or a private party.
    2. Decide how you’re going to repay the loan. Will you use the money from the car sale, or do you have money to pay it off before the sale? You’ll also have to account for any early repayment fees or other costs associated with your lender.
    3. Earn your private buyer’s trust. Some people may be hesitant to purchase a car that’s not fully paid off. Make it clear you intend to pay off the car once you make the sale and offer to bring the buyer to the bank or lender and clear the debt in front of them.

    Consider these factors before you decide to sell a financed car

    Here are 3 factors to think about before selling a car that has a lien on it:

    • Depreciation. The value of your car can drop considerably in a few short years, so consider depreciation and how much money you can reasonably expect to get from selling your financed car.
    • Trust. Most people are wary about buying a car with money owed on it.
    • Risk of going upside down. If you’re working with a dealership and want a car worth more than the value of your current vehicle, you might roll your old balance into a new loan – making it easy for your car loan to become upside down.

    Buying another car? Compare car loan options

    1 - 8 of 8
    Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
    CarsFast Car Loans
    $500 - $75,000
    4.90% - 29.90%
    12 - 96 months
    300
    Min. income of $2,000 /month, 3+ months employed
    Get a new or used vehicle delivered to your door.
    Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs.
    Loans Canada Car Loans
    $500 - $35,000
    0% - 31.99%
    24 - 120 months
    300
    Min. income of $1,800 /month, 3+ months employed
    Compare rates from 60+ lenders.
    Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered. 0% APR for new cars only, used car rates start at 7.99%.
    Coast Capital Car Loan
    Varies
    Varies
    18 - 84 months
    650
    Able to service debt payment of $300/month
    Competitive rates and flexible terms.
    Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.
    Clutch Car Loans
    $7,500 - No max.
    From 3.90%
    12 - 96 months
    580
    3+ months employed, Max.1 bankruptcy
    Pre-qualify for a loan in under 2 minutes with no impact to your credit score.
    Get approved for financing in under 24 hours for the used car you want. No hidden fees. Get the vehicle delivered to your door.
    goPeer Car Loans
    $1,000 - $25,000
    8.00% - 31.00%
    36 - 60 months
    600
    Min. income of $40,000 /year
    P2P platform with competitive rates.
    Canada's first regulated consumer peer-to-peer lending platform that connects creditworthy Canadians looking for a loan with Canadians looking to invest.
    Carloans411 Car Loans
    $500 - $50,000
    1.90% - 19.99%
    Up to 72 months
    300
    Min. income of $1,600 /month, 3+ months employed
    High application approval rate.
    Get connected with suitable lenders to finance your next car, van or truck. Check eligibility for this loan through LoanConnect.
    Canada Auto Finance
    $500 - $45,000
    4.90% - 29.95%
    3 - 96 months
    300
    Min. income of $1,500 /month, 3+ months employed
    Get financing from partnered local lenders.
    Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
    Splash Auto Finance
    $5,000 - $50,000
    9.90% - 31.00%
    24 - 84 months
    300
    Min. income of $2,200 /month, 3+ months employed
    Apply with any credit score.
    Get financing for a new or used car. Auto loans for borrowers with fair credit, bad credit, no credit or bankruptcy.
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    Representative example: Kelly, an Ontario resident, sells her financed car

    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 typeAuto 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.

    Bottom line

    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.

    Frequently asked questions about selling a financed car

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