Sell Your Car When You Still Owe Money
It's possible to sell a car even if you still have an outstanding loan balance on the vehicle. This merely adds a step to the sales transaction: closing the loan with your lender.
- Call your lending institution to determine the best way to close out the loan. At the same time, ask about obtaining a lien release, which states that there are no outstanding loan obligations on your car.
- If you owe more on your loan than you can readily pay prior to a sale, it's possible to close the loan and transfer ownership at the same time. For instance, Escrow.com can facilitate payment to the lien holder during a normal escrow transaction.
- If neither of these options is satisfactory, conduct the sale at the lien-holding institution. The seller can pay off the loan balance with the sale proceeds and immediately sign over the title to the new owner. Call the lending institution beforehand to facilitate this transaction. If the lien holder is out of state, obtain a temporary operating permit from your state's Department of Motor Vehicles. Once the loan is paid off, you can then send the signed title to the new owner. While this option may involve more faith by the buyer, remind that person that it's also in your best interest to transfer the title as soon as possible to eliminate personal liability.
- Leased cars represent a different situation. If you want to transfer your current lease to a new owner, we recommend using a lease-transfer service.