How to Sell a Car That Is on Finance

Selling a car that still has an outstanding loan can seem complicated, but it is a common transaction. When a car is “on finance,” it means there is a lien on its title. This lien indicates that a lender holds a legal claim to the vehicle until the loan is fully repaid. While the car is in your possession, the lender technically owns the vehicle. The lien must be addressed before ownership can be transferred to a new buyer.

Gathering Essential Loan Information

Before selling a financed car, gather precise information about your outstanding loan. The accurate loan payoff amount is important, differing from your monthly statement’s current balance. A payoff amount includes daily accrued interest and any applicable fees. Lenders typically provide a payoff quote valid for 7 to 30 days to account for this.

Contact your lienholder directly to obtain this payoff amount. You can usually reach their loan services department by phone or through their online banking portal. When requesting the payoff quote, ask for the exact amount required to close the loan completely, specifying your intended payoff date. This ensures the quoted figure includes all interest and charges up to that date.

Your vehicle’s title document is also important. In most states, the physical title is held by the lienholder until the loan is satisfied and the lien is released. Understanding your lienholder’s process for lien release after payoff is important, as this impacts how the title will be transferred to a new owner.

Selling Your Car to a Dealership

Selling or trading a financed car to a dealership is often a streamlined process, as they regularly handle vehicles with outstanding loans. The dealership will appraise your car’s value, considering its condition, mileage, and market demand. This appraisal determines their offer.

Once a value is agreed upon, the dealership pays off your existing loan directly to your lienholder. They use the payoff information you provided, including your loan account number and contact details. You will need to provide your vehicle registration, driver’s license, and all keys to the car.

If your car’s trade-in value exceeds the loan payoff, you have positive equity. The dealership will apply this surplus as a credit towards your new vehicle purchase or provide it directly. If you owe more than the car is worth, you have negative equity. The dealership may allow you to roll the difference into your new car loan, increasing its principal.

Selling Your Car Privately

Selling a financed car privately can offer a higher sale price than a dealership trade-in, but involves more steps due to the outstanding lien. Two primary scenarios exist: paying off the loan yourself before the sale, or arranging for the buyer to pay the lender directly.

One approach is to pay off the entire loan balance yourself before listing the vehicle for sale. Use the precise payoff quote from your lender and submit the full amount. After the loan is paid in full, the lienholder will process a lien release, formally removing their claim. This typically takes 3 to 6 business days for the lien release, but receiving the clear physical title can take two to six weeks, depending on state regulations. Once you have the clear title, the sale proceeds like any standard private car transaction, with you signing over the title to the buyer.

Alternatively, you can sell the car privately while the loan is still outstanding, with the buyer paying the lender directly. This scenario requires careful coordination between you, the buyer, and your lienholder. The buyer’s funds will satisfy your loan, and it is crucial to ensure the transaction is secure for both parties. One common method is to meet at your lienholder’s branch, where the buyer can present a cashier’s check or initiate a wire transfer directly to the lender for the payoff amount.

After the loan is paid off, the lienholder will release the lien, and the title transfer process can begin. The lien must be officially released and the title transferred to the new owner to avoid future complications. Documentation for such a sale typically includes a bill of sale, an odometer disclosure statement, and forms required by your state’s motor vehicle department for title transfer. Ensure all required fields are accurately completed and signed by both parties.