How to Sell a Car When the Bank Has the Title

April 6, 2012

Some debtors have figured out how to sell a car with a lien by arranging a private sale agreement in advance, then sending a payoff amount to the bank.

Selling A Car

Many car owners don't know how to sell a car when the bank has the title, which requires paying off your car loan and transferring the title to the new buyer (or the buyer's bank in some cases). If you are still making payments and want to sell your used car, the title almost surely lists the bank as the legal owner and you only as the registered owner.

Find a Buyer

First, find a buyer for your vehicle. Advertise your vehicle in the local newspaper or even on the Internet. Even if the bank has the title, the Kelley Blue Book pricing guide can help you determine a fair selling price for your vehicle.

If you want to sell your vehicle quickly, you may want to sell it for a slightly lower price than other similar vehicles. However, keep in mind that the selling price should be at least enough to cover the balance of your car loan.

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Contact Bank for Payoff Amount

After you find a buyer and agree on a selling price, contact your bank. Your bank or car loan lender should then give you what is called a "10 day payoff amount." This simply means that if you send the payment within 10 days of the quote, you won't incur any additional finance charges. However, if you do not send your payment in within 10 days, the bank may hold the title until any further accrued interest charges have been paid.

Sell the Vehicle

After you know how much you need to pay to your bank, complete the transaction for your vehicle. If the buyer is using a car loan, you may be required to execute and sign certain loan documents to facilitate the sale of the vehicle. However, if the buyer is paying cash, just get the money, or a cashier's check, and provide him/her with a bill of sale.

Send Payoff Amount to Bank

After you have the money from the sale of the vehicle, convert the cash to a cashier's check or money order and send it to your bank. Consider sending the payment via priority mail in order to avoid delays.

Have Title Sent to Buyer or New Bank

Let your bank know where to send the car title. This is especially important if you are selling the vehicle to a buyer that paid you cash. If the vehicle was purchased with a car loan, the buyer's bank will probably contact your bank to have the title transferred to them.

How to Sell a Car without the Title

You often cannot legally sell a car without an auto title transfer. However, in some cases, a would-be seller may be able to get around the title requirement.

Contact Your State Department of Motor Vehicles

Each state has its own rules and regulations about car ownership. Cars get registered according to the state in which they are garaged and driven, and the state of residence of their owner. That means that the state has a lot to do with your situation, whether you're buying, maintaining, driving or selling a vehicle. One thing you will want to ask about is how to get a duplicate title. If your problem is simply that you have lost the title, as the legal owner, you can buy another title from the state. This is often a simple process, and will fix your problem.

Get the Lender's Authorization

Another reason that you may not have the title is that a lender who helps you finance a vehicle will generally hold onto the actual title until the car or truck is completely paid off. This happens a lot with local dealerships—you buy a car or truck, agree to make payments and drive off the lot. However, the dealer is still holding the title for the vehicle. In legal terms, this is called a "lien." If you are in this situation, you need to either pay the car off before selling, or make arrangements for the car's next owner to take over your debt.

Inform the Buyer

Any time you want to sell a vehicle without the title, you need to let the buyer know the specifics of your situation. It doesn't matter why you're selling the vehicle. Even if it's not a "regular" kind of sale, the buyer must understand exactly what the issue is regarding the vehicle title. Otherwise, he or she will probably back out of the deal, and you'll be stuck at square one. Trying to avoid the issue of a missing vehicle title is never a good idea.

Call Local Scrapyards

One of the biggest exceptions to the rule of mandatory title transfer for auto sales is when a vehicle has reached the end of its usable life. If you have a vehicle that you want to sell for parts, or for scrap, check with your local salvage businesses. They often know how to get around some of the paperwork that is meant to accompany a driver to driver sale.

Paperwork Guidelines for Proper Title Transfer

While forms needed to transfer the car title for a used car will vary slightly from state to state, they are almost the same in most respects. Names for the documents or forms may vary, but the content of the forms, and the purpose for which they are used, will likely be very similar.

Certificate of Title

Make sure that you have a certificate of title from your state's Department of Motor Vehicles (DMV) or Department of Transportation (DOT) before you attempt to sell your vehicle. If you don't have an original certificate of title, you need to visit the local branch of your DMV or DOT and request a duplicate.

A Receipt for the Buyer

In most cases, you need to provide the buyer with a bill of sale. A bill of sale acts as a receipt for the purchase of the vehicle and provides basic information needed to prove that the sale actually took place. You can download a bill of sale template on the Internet, or you can create your own. Whichever route you choose, just make sure the bill of sale contains the following information:

  • Date of sale
  • Seller's name and address
  • Buyer's name and address
  • Description of the vehicle
  • Vehicle identification number (VIN)
  • Selling price for the vehicle
  • Odometer mileage readings

In most cases, the certificate of title and a bill of sale are the only documents you need to sell your vehicle to a private party. If you're selling a vehicle to a dealership, the dealer may have other forms they require you to fill out before buying your car. Most states only require that you have the above documents when transacting the sale of a used vehicle.

Protect Yourself from Potential Liability

Even after you've completed the sale of your vehicle, there is still one final document you want to make sure you fill out and submit to your state's DMV. This document is called a Notice of Sale Form in many cases, although it may be called other names in some states.

A Notice of Sale form protects you from potential liability issues by informing your state's DMV that you no longer own the vehicle. If the buyer of your vehicle is involved in an accident or commits a crime while driving the car, you may still be held liable if you do not promptly notify your state of the sale. Always ensure that you notify the DMV in your state as soon as possible about the sale of your used car.

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