Selling Your Car Privately When You Still Owe Money on It

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

, - April 1, 2020

If you still have a balance on your car loan, it’s possible to sell it privately. Selling your vehicle privately doesn’t have to be difficult, but you may find it easier to deal with if there’s equity in the car. Let’s look at the process of a private sale, and how it differs with each equity position.

Selling Your Car Privately

Just because you’re still paying for your car doesn’t mean that you’re stuck with it. One option is to simply sell it yourself. Private sales are still possible even if your vehicle isn’t paid off. However, your loan needs to be paid in full before the title can be transferred to a new owner.

In order to begin the process of selling a car yourself, you have to do a little legwork, starting with finding out the payoff amount. Keep in mind that the payoff amount is likely more than what you owe on your loan, since lenders typically add 10 days of interest to cover the time to close out the loan.

You can contact your lender and request a payoff quote at any time. This quote typically includes the current balance plus the additional interest, and the date that it’s good until. The payoff amount also changes due to interest charges and payments made while selling your vehicle, since just because you’re trying to sell it doesn't mean you can stop making payments.

The second step you should take to sell your car privately when you still owe money on it is to find out the estimated value of your vehicle. Using valuation sites such as Kelley Blue Book or NADAguides, you can get an approximate value and compare it to your payoff. If your car’s value is greater than what you owe, you have equity. If not, then you’re in a negative equity position.

The process of selling your vehicle with and without equity differs a bit. And while it can be done with negative equity, you may find it easier to sell your car privately if it’s worth more than you owe.

Selling Your Car With Equity

Selling your vehicle privately when you have equity means that you pay off your loan with the money from the sale, and keep what the buyer gives you that’s above the payoff amount. If you’re financing through a bank or credit union, you and the buyer may be able to meet there to take care of the payment and the paperwork.

Otherwise, you can typically have the buyer send the lender a check for the loan payoff amount, and, once that check has cleared, give you a check for the remainder. If the buyer prefers to pay the lender in full, the lender then cuts you a check for the difference.

Once the lender is paid, they send a release of lien letter to you. After you receive the letter and a check from either the lender or buyer, you can sign the title so the buyer can title and register the car for license plates. Make sure you check with your state’s laws on selling a vehicle privately to see if you need to accompany the buyer to the DMV to sign the title.

Selling Your Car With Negative Equity

The process of selling your car privately when it’s upside down is essentially the same as if you had equity. There’s just one major difference: if the value of your vehicle is less than what you owe, you’re probably not going to get enough from the sale to cover the loan payoff. This means it’s up to you to pay any remaining loan balance once the car is sold.

In this case, you can either meet at the bank or credit union with the buyer and you both pay the lender, or, if the lender doesn't have an office where you can meet, both you and the buyer must send checks to the lender.

Once the lender receives the checks and the loan is paid, the lender sends you a release of lien letter. If you live in a non-title-holding state, you give this letter and the signed title to the buyer, who then takes it to a DMV or Secretary of State office to re-title the vehicle and register it for license plates. In title-holding states, you may have to accompany the buyer to either the DMV or the Secretary of State office to complete the paperwork.

If all this seems like a bit too much for you to deal with on your own, you still have one other option for getting out of a car you still owe money on: trade it in.

Trading In Your Car

The beauty of a trade-in is that you don’t have to wait until your loan is paid off to start looking for another vehicle. Additionally, the same rules about equity still apply. If you’re trading a car with equity, the dealer can pay off your existing loan and give you the difference, or you can use that cash for a down payment on your next vehicle.

With negative equity, you’re still responsible for paying your lender the difference between what you owe and what you get for your trade-in. In some cases, though, a new lender may be willing to roll over the negative equity.

What this means is that they pay off your current lender, and add the negative equity to your new loan. This should be down with caution. It’s a good option for simplicity's sake, but you ultimately end up paying more for your new car and starting with even more negative equity on your new vehicle.

Need to Find Your Next Car?

Whether you sell your car yourself, or are looking for a place to take your trade-in, CarsDirect wants to help – especially if you’re struggling with less than perfect credit. We work with a nationwide network of special finance dealerships that can help you get out of a vehicle when you still owe money. To get the process started, simply fill out our fast, free, and easy auto loan request form and we’ll get to work matching you with a dealer in your area.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

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