It’s not easy to purchase a car today. They’re so expensive that many have to rely on financing and credit for a purchase. Then, loan terms can last so many years that you’re ready to upgrade to a new one before you even have your current car paid off. That means you’re only option to get that new car is to sell your current one.
But how do you sell it if you owe money on it? It’s actually fairly easy, but just requires that your buyer has a little patience. Find the right buyer, and selling a car with a loan can be breeze.
What’s your car’s value?
The first important step to selling your car is to find out what it’s worth. You can do this for free by using popular car valuing sites like Kelley Blue Book. Enter your car’s year, mileage, make, model, the current condition, and then KBB will give you the fair market value of your car.
You’ll want to make sure that you’re looking at the private party section, as this get you the most money out of your car. You can look at dealer trade-in as well, but know that value is going to grossly number, though it is an easier way to sell your car.
Now, with the knowledge of what your car is worth, it’s time to figure out how much you owe on the ride.
Find out if the sale is worth it
Now, you need to contact the institution that financed your vehicle. This could be a bank, credit union, or through someone like GM Financial. Either way, contact the lender, and figure out what your payoff balance will be.
The payoff balance highly differs from what is on your last statement, since interest on loans accrue daily.
Once you have your payoff amount, and know what your car is worth, you can start to compare the two values and find out if it’s worth it to sell the car or not.
If your payoff amount is more than your vehicle is worth, you’re going to be writing a check to the lender minus what the sale amount will be to pay the car off. If your sale amount will be more than payoff, you’ll end up with some extra money in your pocket to put towards your new car.
You’ll have to determine what makes the most sense for you, but armed with this information, you’ll be able to get a much better picture of what purchasing a new car will look like.
It’s worth noting that having a loan on the car while trying to sell it can be problematic; however, so long as you find a buyer that has a little patience, selling a vehicle with money owed on it can go pretty smoothly.
Keep your lender in the loop
The biggest thing that’s going to make selling your car fast is keeping your lender in the loop with what is going on. If you keep a line of communication open with them in the sale process, they can usually get you the documents and information that you need for selling quicker.
And, since you don’t actually hold the vehicle title — the lender does with the ‘lien’ on it — there’s no way to sell it without that line of communication open. But, being friendly and transparent almost always works in your favorite. Call your lender up and ask them what the quickest process is to get the vehicle in the handers of the buyer.
They hear these things often, and they’re almost always willing to help.
Hold the sale at the bank
So, you know your payoff information, and you finally have a buyer. What now? There are only two ways that you can accept cash for this process — cash, or with a cashier’s check from the buyer’s financing institution.
Cash is usually fine, unless you’re dealing with a vehicle that is worth thousands and thousands of dollars. That can make the transaction a little more risky, since buyers can be malicious sometimes. A cashier’s check can also be risky, because there are common scams where the check “bounces” when it finally hits your account.
That said, we recommend holding the sale at the financing institution. This is a centralized spot that allows you to collect funds for the car, and then sign all of the documentation for passing the ownership of said vehicle to the buyer.
It has other advantages to you as well. You can get documents notarized, or any documents that you may discover you need are immediately available, since you’re at the lender’s physical location. Not only that, but tellers and bankers are able to help you count cash and make sure the method of payment is legit. It’s a safe spot, for you and the buyer.
If you’re not dealing with a local lending institution, selling the vehicle is a little more difficult. Because in that case, you’re probably dealing with a big bank, and if you’re doing that, you’ll actually want to take the bill of sale to your state’s Department of Moto Vehicle and obtain a temporary operating permit for your buyer.
This allows you to transfer ownership to the buyer, but without giving them the title. Once your loan is paid off (i.e. their check has been received by your lender), you can get a clear title that you can give a buyer. Often, you’ll need to pay to expedite the title, since lending institutions can take weeks at a time to get that clear title in your mailbox.
Once you receive it, you’ll want to sign it off to the buyer.
Unfortunately, this is a really risky method on the buyer’s side of things, and isn’t often something that they want to go-ahead with — unfortunately, there isn’t an easier way here. Dealing with large financial institutions always takes a lot of time and red tape.
It’s imperative that you’re careful with how you’re paid for your car. Buyers are crafty today, and often try to find ways where they don’t have to pay anything at all for your vehicle.
- Rule 1: never accept a personal check from a buyer. It might seem innocent, but personal checks can bounce and even come from a fraudulent institution. There are cases where buyers will write a personal check as well, and then call up their financial institution to cancel it before you can deposit.
- Rule 2: Following the previous rule, only accept cash or a cashier’s check. And to be extra careful, insist that you go with the buyer to his or her institution to get cash or cashier’s check. You want to be extra careful here, because there are scams out there where there are undetectable cashier checks until they bounce.
You really want to follow those two rules, otherwise the buyer could be holding the cash and the possession of your vehicle, nearly leaving you out of luck with no money and no car.
A trade-in can be easier
As you can see, selling your vehicle to a private party can be a complicated and long process. That’s why many people will take the hit and simply trade their car into the dealer.
The dealer makes it a much easier process, but they’ll often only give you pennies on the dollar for your vehicle. There are cases where where the dealer will only give you 50 to 75 percent of what the actual car is worth. Convenience costs.
That’s why we definitely recommend just putting in the work and selling private party. You maximize your dollar that way. After all, if you have a car worth $15,000, you certainly don’t want to be selling it for less than that, such as $10,000. That’s a major, major loss, and money that could go into a new car.
So while selling private party can be long and stressful, it’s worth it for your pocketbook.
As you can see, it’s a whole lot more difficult to sell your car if you have a loan on it. But, so long as you have a buyer that is patient and understanding, the sale can run very smoothly.
If you follow these tips, you’ll ensure that you and your buyer are both secured during the purchase process. You want to make sure there’s low-risk on both sides, and that usually means being as transparent as you can with the buyer.
And remember, when you finally complete the sale, make sure you’ve done all of the standard procedures like cancelling your insurance and removing your license plate before handing the car over. You’ll also want to make sure that you and the buyer both have copes of the bills of sale, as well as the title.
Happy car selling!