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How to sell a car with a lien

Compare 6 ways to make a sale when you still owe money on your car.

It’s not impossible to sell a car that’s still under financing, but it can be trickier than selling a car you’ve fully paid off. Generally, you still have to pay off the loan before you transfer ownership to someone else. But there are a few ways to speed up that process — or pay it off after.

How to sell a car with a loan on it

You have two main options when it comes to selling your car with a loan on it:

  • Selling it to a private individual
  • Trading it in at a dealership

With both options, you’re still responsible for paying off the loan. With a private party, you can either pay off the loan first or use the profits to pay off your lender. With a dealership, you can switch in your car for a vehicle of similar value and roll your old loan into a new deal.

3 ways to pay off your car loan before selling it privately

Thinking of selling your car to a private party? Here are three options for paying off your current loan:

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

This is the easiest option when money’s tight, but you need to earn the trust of your buyer. Follow these two tips:

  • 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.
  • Figure out if you’ll make a profit or not. Get an idea of your car’s market value and how much it’ll cost to repay the loan in full — including any early repayment fees and other costs. This’ll give you an idea if you’ll make or lose money from the sale.

This option might not be the best choice if your car loan is upside down, or when your car’s value is worth more than its resale value.

2. Refinance your car loan first

You may be able to save some money by switching to a lender with more competitive rates and paying off your car loan. Then you can sell your car to someone else.

Ask yourself these two questions when deciding whether refinancing is right for you:

  • Can I find better loan terms? Calculate your savings by weighing the fees and interest rates of a new loan against any additional charges from closing your old loan.
  • Will I save money? Determine exactly how much you’ll save by refinancing your car loan. Check and double-check it before switching loans.
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3. Use savings, another loan or a credit card to pay it off first

When all else fails, you have a few other options to pay off your car loan before selling your vehicle:

  • Savings. If you can afford it, paying off the car loan with your own savings eliminates debt altogether
  • Low-interest credit card. Good planning can help you keep costs down if you choose a credit card with a low- to no-interest promotional period. However, if you can’t meet the minimum repayments, it could end up costing you more.
  • Small loan. If you plan on selling the car as soon as it’s out of finance or you only have a small amount left to pay off, then a small personal loan might be suitable rather than a refinancing loan.
  • Debt consolidation loan. If you have multiple high-interest loans and credit cards on top of your auto loan, you can consolidate all your debt to get rid of your car loan and sell the car.

3 ways to sell a car with a lien to a dealership

Prefer to work with a dealership instead of a private seller? Many are happy to work with buyers who still have a lien on their car — and you may even be able to get more reasonable rates.

1. Upgrade to a new car

If you want to upgrade your car, many dealerships will incorporate the terms of the loan into a trade-in deal — especially if it’s the same dealership you used for your first car. You might end up with a larger car loan, though.

2. Trade in your car for cash

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 buy a new car elsewhere or spend it as you like.

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.

Not sure what to do? Ask your lender

Your lender will likely have an idea of what you need to do to pay off your loan if you’re not sure which to choose. Most have worked with borrowers in this situation before and have an idea of what your best options are.

How to trade in your car in 6 steps

Technically, all you need to do to trade in your car is bring it to a dealership, pick a new car and sign the paperwork. But you probably won’t get the best trade-in value. These steps can help ensure you don’t go into a trade-in blind and get a raw deal.

  1. Get an estimate of your car’s value. Websites like National Automobile Dealers Association Blue Book, Kelley Blue Book and Edmunds can help estimate your used car’s value. If your car has been damaged, take it to a mechanic to appraise it since its value might have been affected.
  2. Calculate your equity. If you’re still paying off your loan, determine if you have positive or negative equity by subtracting your loan balance from the trade-in value. If you get a positive number, you might get a better deal when you trade it in.
  3. Gather your documents. Dealerships typically ask to see several documents when giving you a quote, including: car title, car registration, loan payoff amount , loan account number and your driver’s license.
  4. Get quotes from a few dealerships. Some dealerships might give you a quote over the phone or by email, while others might insist you bring in the car. Even if a deal sounds good, don’t sign any paperwork until you’ve heard from other dealerships.
  5. Negotiate with your chosen dealership. Use the different quotes you received to negotiate a better deal. If you think a dealership isn’t giving you a fair price on a used car, consider having the vehicle appraised by an independent third party.
  6. Close on your trade-in. If your car’s trade-in value is worth more than your car loan balance, the dealer deducts the difference from the new car’s price. If you have negative equity, you must cover the difference between your loan balance and the trade-in price.

What information do I need to sell my car?

Gathering together this information first to smooth the sale process.

  • Payoff amount. This is the amount you need to pay to completely pay off your loan. It’s different from the loan balance because it includes future interest that adds up.
  • 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 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 Kelley Blue Book or Edmunds to prepare yourself for negotiations — or have it evaluated by an expert.
  • Your car’s equity. 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.

How to figure out how much your car’s worth

Getting an estimate online is a great way to make sure you’re getting a fair deal before you sell or trade in your car. It won’t be the most accurate, but it can give you a ballpark idea of what your car should be worth.

  1. Gather your information. Have the following details about your vehicle on hand before getting started with a car-pricing service: year, model, make, mileage and color. To get a more accurate quote, include details about the vehicle’s condition and any additional features you added.
  2. Visit multiple car-pricing services. Get quotes from multiple car-pricing services to get a range of values for your vehicle. Each site has different standards for condition and might give you slightly different quotes. Some popular sites include: Edmunds, Kelley Blue Book, NADA Guides, Carfax and Consumer Reports.
  3. Get quotes for multiple types of car values. How much your car is worth depends on how you plan to sell it. Look up the following values before you decide what you plan on doing with your car: trade-in value, private-party value and dealer retail value.
  4. Compare the price to similar vehicles in your market. Once you’ve gotten a few estimates from car-pricing sites, look at the current market to see how similar cars are selling. If there’s a high volume of cars like yours, you might not be able to negotiate as high of a price as you might otherwise.

      More steps to take before selling a car with a lien

      Follow these steps before selling a car you still owe money on:

      1. Weigh your selling options. Decide whether you want to sell to a 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 penalties associated with your lender.
      3. Earn your private buyer’s trust. Some people may hesitate 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. For peace of mind, 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

      Here are three factors to take into consideration 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 for your car.
      • Trust. Most people are wary about buying a car with money owed on it.
      • Risk of going underwater. 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. This can make it easy for your car loan to become upside down.

      Selling a car with positive vs. negative equity

      Selling a car that’s worth more than your loan balance is generally easier than selling a car valued less than your balance.

      With an underwater car loan, you’ll still be responsible for covering the difference between your loan balance and car’s value when you sell it to a private party or dealership. To get the most out of your sale, consider investing in some improvements — or, at the very least, make sure it’s spotless.

      Bottom line

      Talking to your lender before selling your car can help you understand the conditions of your loan and your options. They may even be willing to readjust the terms of your current loan to help you pay it off faster.

      You can learn how car financing works by reading our guide to auto loans.

      Frequently asked questions

      Help! No one wants to buy my car. What can I do?

      If you aren’t up front about the car having a debt on it when placing an ad, then it might look shady when you disclose that later. Make it clear up front that you have a plan for repaying the loan.

      How can buyers tell if a car has a lien on it?

      Buyers can view the vehicle history report to see if it’s under financing.

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