How to Sell a Car With a Loan

by Kenneth W. Michael Wills

You can sell a car with a loan on it, but should first ask yourself whether it would be financially prudent. Most car owners find they owe more on the car than it is worth. In addition, in most cases it is cheaper to repair and maintain an older vehicle than to purchase a new one. Going to a dealership is usually a bad financial move because you trade in the vehicle and roll over the loan to the next car, which usually is worth less than you owe. In rare cases, selling the car is the best option, such as when the car truly is a lemon, you have new family members or you simply can't afford the payments.

Request information from your lender on the best ways to quickly close out your loan. You will also want to ask your loan provider to explain the process for a "lien release," which states you have no financial obligation on the vehicle. Pay off your vehicle and secure your lien release from the bank. Then advertise your car for sale in local papers and on the Internet until you find a buyer.

Open an escrow account if you cannot pay off your vehicle without selling it first. This will allow you to sell the vehicle and close out your loan simultaneously. The escrow provider will make sure payment goes to your lender, secure your lien release, and transfer the car's title to the buyer. Quite a few websites offer this type of escrow service.

Speak with your lender about transacting the sale on your behalf if you do not want to use an escrow service. Your bank will conduct the sale for you, use the proceeds to pay off your loan and transfer the title to the new owner. All financial institutions will have processes and procedures for this type of transaction. You must speak with a representative for your lender to determine how to best proceed.

Sell the vehicle on the private market if you do not want to involve your bank. Contact your bank and determine the exact amount you need to close out your loan. Set your sale price about 10 percent above that amount. Advertise the vehicle in your local paper, on bulletin boards and on the Internet. When you find a buyer, go to your financial institution to conduct the transaction. Have the buyer give the lender a certified cashier's check for the total amount to close out your loan. The bank will then issue the lien release. Take the lien release and your buyer to the DMV and request all paperwork to sign over the title to the new owner. Complete the paperwork and submit it to the DMV representative to sign over the title and complete the transaction.


  • close None of these options is simple if you owe more than the car is worth because a buyer likely will not give you enough cash. If you cannot collect enough cash to pay off your loan, the bank will not issue you the lien release. This negates the possibility of signing over your title. If you owe more than the car is worth, it is best to pay off the vehicle before trying to sell.

About the Author

Kenneth W. Michael Wills is a writer on culture, society and business. With more than 15 years of experience in sales, public relations and written communications, Wills' passion is delighting audiences with invigorating perspectives and refreshing ideas. He has ghostwritten articles on a diverse range of topics for corporate websites and composed proposals for organizations seeking growth opportunities.

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