How to Sell a Car with an Existing Loan
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Most people sell a car at some point in their life. But it’s not always old cars that we’ve had for a decade or two that we decide to sell. Sometimes people sell cars that they’ve only had for a few years.
If you’re doing that, then you still may have a loan out on the car, and owe money to a lender. So, how do you go about selling a car with a loan? Read on to find out.
Step 1: Contact your lender and let them know you’re planning on selling your car
The first thing you want to do when selling a car with a loan is contact your lender. Whether your car is financed through a corporate bank or financier, or a private company or smell credit union, you need to let them know that you’re planning on selling the car, so they can alert you to any information that you may need to know.
It’s vital to include your lender in this process, because ultimately they own the car until it’s fully paid off. As long as you still owe your lender money, it’s technically their vehicle, and they should be included in this process. Some lenders have different requirements, so they’ll let you know everything you need to know as you begin the process.
Step 2: Ask the lender how much you owe on the car
The other reason for contacting the lender is to figure out how much money you owe on your car. In order to proceed with selling your car, you need to know how much money is still owed to your lender. Ask them for the balance on the car, so you can see how much more money they need to receive in this process.
Step 3: Figure out how much your car is worth
Now it’s time to figure out how much your car is worth. The best way to do that is by using an appraisal website, such as Kelley Blue Book. With a website such as Kelley Blue Book, you can get a great estimate for how much money you can sell your car for.
Step 4: Find a buyer
Now that you know what your car is worth, it’s time to find a buyer. List your car, and negotiate with potential buyers until you’ve received a deal that you’re comfortable with.
Step 5: Determine the difference between what you owe and what the car is worth
Now you have the two prices involved: the amount that you still owe on the car, and the price that you’re going to get from the buyer. Sometimes the former will be larger than the latter, and sometimes the latter will be greater than the former.
If you’re selling the car for more than you owe, then that means you have positive equity, and stand to make money from this process. If you’re selling the car for less than you owe, then you have negative equity, and will owe money to the lender. Figure out the difference, so you know how much money you’ll be making or losing.
Step 6: Have the buyer pay the lender, with the difference going into or out of your pocket
Now it’s time to take whatever advice your lender gave you for completing the process, and involve the buyer along the way.
Here’s how it works: The buyer will pay the amount you agreed on to the lender. If you have positive equity, the lender will then pay the excess money to you. If you have negative equity, then you’ll owe the difference to the lender, which you can pay at once or over time by setting up another loan.
If you have positive equity, you can also have the buyer pay off the exact loan amount, and then pay you separately. However, since the buyer will likely be using a lender of their own, it’s easiest to have it go through your lender.