How Do I Sell a Vehicle That Has a Loan?

by Owen E. Richason IV

Automobile owners wishing to sell their vehicle with an existing lien (auto loan) may do so at any time during the time of the loan. Considerations for before sale are time left to full amortization of the loan, resale value to a private party or resale value to a public dealership, cost of readying the vehicle for sale, cost of selling the vehicle, time frame for sale, and cost and time for paying the remaining loan balance and transferring the title to the buyer.

Ascertain the value of the vehicle relative to sale to a private individual or to a public dealership. Private party value is normally higher than sale to a public auto dealer. Factors that determine a car's value are year, mileage, wear and tear and overall condition.

Request a payoff statement from the lender. Contact the lien holder (for example, the bank or financial institution that services the loan) and request a payoff statement. A payoff statement will include unpaid principle balance and interest; there may be a penalty for early payoff.

Draft a contract for sale, otherwise known as a bill of sale. Include a description of the vehicle, VIN and the purchase price and any "promises" that might be included (for example, repair of minor damage or replacement of parts). Also include estimated dates for loan payoff and receipt of title from the lien holder, along with an estimated date of title transfer. Review the bill of sale with the buyer and have it notarized.

Deposit the funds from the buyer with the lender and allow time for the funds to clear. Transfer the title to the buyer after the funds have been accepted by the lien holder and confirmation of same is given; cancel the insurance thereafter.


  • check Keep the insurance on the vehicle until the sale is complete and the title has been transferred.
  • check Out-of-state sales may require more time; allow for time to process both the payoff and title transfer.


  • close Verify and vet all out of state buyers.
  • close Do not accept checks, money orders, certified checks that exceed the agreed purchase price.

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About the Author

Owen Richason grew up working in his family's small contracting business. He later became an outplacement consultant, then a retail business consultant. Richason is a former personal finance and business writer for "Tampa Bay Business and Financier." He now writes for various publications, websites and blogs.

Photo Credits

  • photo_camera classy car for sale image by itsallgood from