You can sell a car with a loan but you'll need to give the full payoff amount to your lender before they'll release the car title. You can do this with your funds after you complete the sale, or you can refinance your car loan or apply for a personal loan.
If you owe more than your car is worth, the buyer will pay the sale amount to the lender. You pay the difference between that amount and what you still owe on the car. For example, if you owe $10,000 before the sale and your buyer will pay $9,000 for your car, you would pay the lender the $1,000 difference.
In most instances, yes, you can trade in a car with a loan, and some dealers might roll your remaining balance into a new loan. But trading in your car doesn't make your loan disappear.
As long as what you're selling it for is either equal to or more than the amount you owe yes you can sell it. You just have to make sure that your loan allows you to pay it off early without any penalties. As well as make sure to pay the loan off. Because the lien on the loan will not come off until the loan is paid.
Note: If you're selling a car with an active loan, you're still the one responsible for paying it off, so the remaining balance on the loan will likely be subtracted from the price the dealer offers you. So if you owe more than what the dealer offers, you'll need to pay the difference to the lienholder.
The Impact on Your Credit
A concern for many is whether selling a financed car will hurt their credit. Generally, selling a car—be it privately or through a dealership—should not negatively impact your credit score. It might even improve it if you manage to pay off your existing auto loan completely.
One way to get out of a car loan is to sell the vehicle privately. If you're not upside down on the loan, meaning the car is more valuable than what you currently owe on it, you can use the proceeds of the sale to pay off the current loan in full. Another term for an upside-down car loan is negative equity.
Often, it's best to pay down or pay off your auto loan before selling it or trading it in. The main concern is whether you have positive or negative equity on your loan. With negative equity, you should pay off your auto loan before you trade in your car.
How Much Negative Equity Is Too Much on a Car? The maximum negative equity that can be transferred to your new car is around 125% . It means your loan value should not be more than 125% of your car's actual worth. If it is more than 125% then your next car's loan would not be approved.
Vehicle Value – Payoff Amount = Vehicle Equity
Negative equity means your vehicle's value isn't high enough to pay off your outstanding loan balance. If you wish to sell a financed vehicle with negative equity, you'll either need to pay off the remaining loan balance out of pocket or roll that amount into a new loan.
You can sell your car if you still owe money on it. But you'll need to pay off the debt before you can transfer the title to the car's new owner. The process differs depending on whether you're selling the car to a dealership or a private buyer.
If you financed with a secured loan, you will not be able to do this until you've paid off the loan because the bank will place a lien on the car title. If you financed with an unsecured loan, you will be able to do this as you will have the title free and clear from any liens.
You'll need to get permission from the finance company first and find out the settlement figure (the amount needed to pay off the loan). You'll need to pay off the remaining balance on the loan before or as part of the sale process.
CarMax buys vehicles that are not paid off. To sell a car you still owe money on to the retailer, you must provide loan information so CarMax can pay off the lender. If you owe more than your offer, you will need to cover the difference.
Voluntary repossession is when you return a car you can't afford to the lender. Before making a decision that will hurt your credit score, learn more about your options.
The dealership contacts your lender: In most cases, the dealership will contact your lender and pay off your original loan in full using your trade-in value as the credit. If you still owe money after the trade-in credit is applied, that amount will get rolled over into your next car loan and added to the balance.
Your total-loss insurance payout will be for your car's ACV only. If you owe more money on your loan than your insurance settlement, you are still responsible for paying the difference. Most insurers offer "gap" coverage, which pays the difference between your car's AVC and your loan balance.
If you're interested in trading in your upside-down car, some dealerships will offer to pay off the loan for you. Sounds too good to be true? It's because it is. While the dealer will pay for this loan upfront, this balance will get added to the loan of the new vehicle.
Ask about voluntary repossession: Voluntary repossession involves asking the dealer to take back your car because you can no longer afford the payments.
Losing your car can hurt your credit quite a bit unfortunately. Having your car repossessed or surrendering it voluntarily is seen as a major negative event by lenders. They'll view you as high-risk. Expect your credit score to take a big hit, maybe over 100 points or more.
You will need the title before selling the vehicle to a junkyard. Once you have your title, make sure you can sell the vehicle. If it has a lien placed on it, you'll need to pay off the loan before you can sell your car.
The two most common options people consider when it's time to sell a car that you still owe money on are trading it in at dealership towards your next car or selling it privately on your own.
If you financed a vehicle purchase through the dealer, they may have specific rules about when you can and can't return a car. Leasing agreements may include clauses for returning a vehicle early, though you may pay a penalty to do so. Returning a car you financed may have negative impacts on your credit score.
Trading in a car generally helps you reduce how much you'll need to borrow when buying another vehicle, but if you have a balance on your current auto loan, you may be encouraged to roll your existing balance into a new loan, which will increase your total loan costs and the interest you'll pay over the life of your ...