How to Sell Your Car When You Still Owe Money on it

March 7, 2012

The question of how to sell your car with an auto loan remaining does not need to be difficult or complicated. In fact, the most confusing aspect of selling a car with a lien on it can be the word 'lien' itself. Lien is another word for financial interest. While you owe money to a bank, the bank has a lien on your car. Selling a car you have not yet paid off is not as simple as selling a car you own outright. This article will address how to sell your car even if you still own money on it. The exact process will change depending on who you are selling to and how large the amount still owed is. It will also depend on if you are buying a car from a dealer with proceeds from the sale, or if you are only selling. Normally you could simply sell the car, but when you still own money, you do not have the lien to the car. In order to sell a car with a lien on it, you need to pay off the bank with the lien to have it removed. Once the lien has been removed, you can proceed with the sale.

Step One: Find Out Your Pay-Off Amount

The first thing you will need to do is to contact the company that financed your purchase of the car in the first place. You will need to get a quote from them as to what the pay-off amount will be. This amount will be different from the amount still owed. 

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Step Two: Start the Selling Process

Once you have that information in hand, start the selling process. The simplest situation you will find is going through a car dealership. They generally will take care of all of the paperwork on your behalf. You may be able to find a better deal when selling privately, but the dealership will be the least complicated option. If you sell to a dealership, they may give you the difference between the money still owed to the financing company and the selling price, or they may apply it toward paying for a new car. This depends if you are planning on buying from the same dealership.

Step Three: Consider an Escrow

If you decide you do not want to sell your car to a dealership, and you would rather sell it on your own, you may find yourself in a seemingly impossible position. You will not be able to transfer the title to the buyer if there is still a lien on the car, and you will not be able to pay off the loan to remove the lien without transferring the title to the buyer, so they will pay the bank the pay-off amount. What you can do, however, is to go with the buyer to the bank and do everything simultaneously. If the bank is not located locally, you can investigate escrow options. An escrow will hold the buyer's money while the title is retrieved and sent to the buyer. An escrow contract will be set up for this purpose. 

It is common to sell a car that has not been fully paid off, but not everybody realizes they have options when it comes to how they can sell it and to whom. With this information you will be able to make selling your car work for you.

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