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You have two main options when it comes to selling your car with a loan on it:
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.
Thinking of selling your car to a private party? Here are three options for paying off your current loan:
This is the easiest option when money’s tight, but you need to earn the trust of your buyer. Follow these two tips:
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.
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:
When all else fails, you have a few other options to pay off your car loan before selling your vehicle:
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.
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.
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.
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.
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.
Gathering together this information first to smooth the sale process.
Follow these steps before selling a car you still owe money on:
Here are three factors to take into consideration before selling a car that has a lien on it:
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.
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 about how car financing works by reading our guide to auto loans.
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 or not.
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