Can You Sell a Car Privately With a Loan?

by Andrew Rohrlich

How To Sell Your Vehicle Privately With a Loan

If you want to know how to how to sell vehicle with loan, you must:

  1. Gather relevant information and forms
  2. Calculate your equity
  3. Find out your loan payoff amount
  4. Contact your lender, bank, or credit union to discuss options
  5. Make sure the title transfer process runs successfully
Gather Important Information and Documents

To better understand how to sell a car with a loan, consider collecting the following:

• Make

• Model

• Year

• As-is Condition

• Vehicle Identification Number

• Odometer Disclosure Form

• ZIP Code

These pieces of information help with the valuation and sale processes. The make, model, year, and overall condition are descriptive details you can use alongside a pricing guide to determine your car’s private party value. Your car’s vehicle identification number (VIN) serves as its fingerprint. It distinguishes it from other vehicles with the same make and model, thus limiting confusion during a private sale and decreasing the risk of fraud.

Your odometer disclosure form reveals your car’s mileage, which impacts the sale price. Lastly, the ZIP code where you keep your current vehicle helps potential buyers gauge how near or far away it is from them, making pickup flow seamlessly after the sale.

You do not have to gather the following documents, but they can help with valuation and sale activities:

• Owner’s Manual

• Warranty Forms

• Emissions Test Results

The owner’s manual will help you pinpoint all the systems in your vehicle that could boost its value. If you have an automobile with rare or expensive features (e.g., a digital rearview mirror or premium surround sound), the owner’s manual will highlight them. Many potential buyers seek cars with warranties, so warranty forms are resourceful if they are transferable. They are probably crucial if you are trying to sell an automobile under five years of age.

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Many states require car owners to perform emissions tests regularly. Look through your test results to determine the number of pollutants your car releases because that can affect its value. The number of maintenance procedures your vehicle has undergone can also impact its value, so consider having your car’s service records at hand.

Determine Your Equity

Once you have gathered relevant information and forms, you can determine your equity. You calculate the equity in your car by subtracting your loan payoff amount from the car’s sale price.

Positive Equity

You yield positive equity if your car’s value is more than the payoff amount. For example, if the car’s value is $14,000 and the payoff amount is $10,000, you have $4,000 in positive equity.

Negative Equity

Negative equity occurs when the car’s value is less than the payoff amount. For instance, if the car’s value is $12,000 and the payoff amount is $15,000, you need $3,000 to pay the loan off.

Inquire About Your Payoff Amount

You can contact your lender, bank, or credit union directly to learn how to sell a vehicle with a loan and request they provide you with your loan payoff amount. Some lending institutions specify the payoff amount for each account holder on their websites. The payoff amount consists of the loan balance, interest, and other fees. In most cases, the payoff amount will be viable for several days.

Discuss Your Options With Your Lender, Bank, or Credit Union

Depending on the nature of your equity, you will have several options concerning how you approach your private sale and pay off your loan. Discuss the following scenarios with your lender, bank, credit union, or other lending institution.

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If you have positive equity, complete your private party sale and use the funds to pay off your loan. Then, you can:

• Save the extra amount, or use it to make purchases that are not car related.

• Apply the extra amount to a new car loan to avoid starting from scratch to obtain another vehicle.

If you have negative equity, you can:

• Pay the negative balance on your own, using cash from your savings or emergency fund.

• Delay your private sale activities, and make payments on your car until you have achieved positive equity.

• Sell your car to a buyer willing to pay more than the car’s resale value and use the extra funds to pay the negative equity difference.

Ensure the Vehicle Title is Transferred Successfully

Here is what you can expect to occur during the title transfer process if you have positive equity or if you pay off the negative balance on your loan:

  1. You sell the car, and the buyer gives you enough funds to cover the loan payoff amount.
  2. The lender sends a release of lien letter to you since you have paid the loan in full.
  3. You take the letter to your department of motor vehicles so that you can receive a lien-free title, making you the official owner of the car.
  4. You release ownership of the vehicle by signing the title.
  5. You give the signed title to your buyer.
  6. Your buyer takes the signed title to the department of motor vehicles.
  7. Their department of motor vehicles will present them with a new registration and title.

What Else Can You Do If You Have Negative Equity?

If you have negative equity and do not have enough money yourself or from a buyer to pay off your lender, you can also consider refinancing or using a personal loan.

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Consider Refinancing

You could refinance by reducing your interest rates. Doing so can cause your negative equity to decrease substantially over time until you can pay it off yourself or enter into the positive equity bracket. Another way you can refinance is by extending the length of your loan repayment period. Extending the loan term can be beneficial because it can lessen the amount you have to pay each month. If your monthly payments are a few hundred dollars less than they were before, it can give you time to save up and pay off the negative balance.

Consider Taking Out a Personal Loan

When you have good to excellent credit, you can take out a personal loan to pay off the amount on your negative equity. You can use a large personal loan to pay the difference in full. You can also use a small loan to pay it off partially. Consider getting as small of a loan as possible to dodge incurring significant debt. A small loan plus money from your savings fund could potentially pay off the total of your negative equity.

This article was written by Andrew Rohrlich.As a brand and product marketing expert, Andrew Rohrlich has crafted products, experiences and communications for household names like Gap and for multiple automotive technology businesses. For nearly a decade Andrew has studied automotive retail in depth from a customer point of view and aggregated the industry’s best research, thought leadership and know how to provide credible and important information to auto shoppers and sellers.

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