Can I Sell My Car for Less Than I Owe?
Understand how to navigate selling your car, even if its value is less than your outstanding loan. Discover your options for a smooth transaction.
You can sell your car even if you owe more on your auto loan than the vehicle’s market value. This situation, known as being “upside-down” on your loan, means the car is worth less than the outstanding debt. Selling a car with negative equity requires planning, but options are available to manage the financial difference.
Understanding Your Car’s Value and Loan Balance
Before selling, assess your car’s market value and loan balance. Online valuation tools like Kelley Blue Book (KBB) and Edmunds provide estimated values based on your car’s make, model, year, mileage, condition, and features. These tools offer different values for trade-in, private party sale, and dealer retail.
After estimating your car’s value, obtain your loan’s exact payoff amount. This is the total sum needed to satisfy your debt, which can differ from your last statement due to interest and fees. Contact your lender directly via their website or phone for an official payoff quote. Lenders often provide a “10-day payoff” quote, including principal, accrued interest, and applicable fees, valid for a specific period.
Compare your car’s market value to your loan’s payoff amount. If the market value is higher, you have positive equity and may receive money after the loan is settled. If the payoff amount exceeds the car’s market value, you have negative equity, meaning you owe more than the car is worth.
Methods for Selling with a Loan
Selling a car with an outstanding loan requires settling the loan and transferring the title. Regardless of the selling approach, the lien on the vehicle must be cleared by paying off the loan before the title can be transferred to a new owner.
Selling to a dealership, either as a trade-in or outright sale, is an option. Dealerships handle financed vehicles by managing the loan payoff. They obtain your payoff amount and pay your lender directly. If your car’s value exceeds the loan, the dealership applies the difference to a new purchase or pays it to you. If the value is less than the loan, you must cover the difference directly to the dealership or lender.
A private sale to an individual buyer may offer a higher sale price than a dealership trade-in. You and the buyer must coordinate with your lender to pay off the loan and transfer the title. The buyer can pay the sale amount directly to your lender, with any remaining balance remitted to you. Alternatively, the buyer might pay the loan balance to your lender and the remainder to you. Some lenders may require completing the transaction at their branch.
Online third-party buyers like Carvana or Vroom offer a streamlined process. They provide instant online offers for your vehicle. If you accept their offer, they typically handle the loan payoff directly with your lender. You provide your loan payoff information, and they may assist in collecting it. If your car’s value exceeds what you owe, they pay you the difference after settling the loan.
Handling the Unpaid Loan Amount
If your car’s sale price is less than your outstanding loan balance, you are responsible for the difference. This negative equity means you must cover the remaining debt to satisfy the loan and release the title.
The most direct way to handle this is by paying the difference out-of-pocket. Use your own funds to cover the gap between sale proceeds and the total payoff amount. Paying the full remaining balance closes the loan, ending your obligation to the lender.
If trading in your vehicle, you can roll the remaining balance into your new car loan. This adds the deficit from your old loan to the principal of your new loan. While this eases new vehicle acquisition, it increases the total financed amount, leading to higher monthly payments and more interest over the new loan’s life. Lenders often limit negative equity rollover, typically financing up to 120% to 130% of the new car’s value, including the vehicle price, taxes, fees, and any negative equity.
Alternatively, secure a separate personal loan to cover the difference. This allows you to pay off the original auto loan in full, releasing the car’s title. Personal loans are unsecured, so the car is not collateral, but they may have higher interest rates than auto loans, especially with less-than-excellent credit. Compare interest rates and terms to see if this option suits your situation.