How to Sell a Car With Payments Left in 4 Steps

How to Sell a Car With Payments Left in 4 Steps

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Deciding to offload your current vehicle can happen for several reasons.

Maybe another make and model caught your fancy, and you're excited to try something new. Or perhaps you moved to a region with more extreme weather conditions, and you need an SUV or pickup with all-wheel drive for extra traction on the road. Or it could also be that your current make and model hasn't met your expectations, and you want a vehicle that provides a little bit of everything: performance, fuel economy, and cargo space. 

But whichever reason it happens to be, first, you'll probably want to sell or trade in your old vehicle.

But what if you want to sell but still have remaining payments on your car loan? Let's look at the details of how to sell a car with a loan.

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How to sell a car with a loan

Step 1: Market research

Spending some time on the internet to find the value of your vehicle can guide you in setting the correct asking price or knowing what to expect if you decide to trade it in. It's as easy as entering the make and model along with the mileage and year in any search engine to see the corresponding market pricing for private party sales and trade-ins. 

Though car buying is a lot of fun, applying for financing can be a hassle. It's hard to know who to trust and where to find the best loan for you. But Shift makes it easy, working with a network of trusted lenders who compete for your business, so you get the best deal on financing. And Shift offers fair, no-haggle prices driven by powerful machine learning algorithms and tons of data, so you know you're getting a great deal on your next vehicle. Want to take a test drive before you buy? If you live in one of Shift's many service areas, a concierge will drive to you, letting you get a feel for the performance before signing the papers. 

Step 2: Talk to your lender

Before you sell your vehicle with a loan, it helps to speak with your lender ahead of time. You'll need to determine the payoff amount, which is the total money required to buy the car outright. In most cases, you must pay this obligation for the lender to transfer the car title over and release ownership to the new owner. 

It also helps to ask them the specific steps you should take when completing a private sale. If you borrowed from a local lender, they may ask you to bring the buyer into their office to write a cashier's check, transfer ownership and sign the bill of sale. Or, if you dealt with an online lender, you may be sent to one of their affiliates to finish the transaction.

Step 3: Determine positive or negative equity

If your vehicle's market value exceeds your remaining loan balance, you hold positive equity. But if your outstanding payments are more than the worth of your car, you're underwater on your loan and have negative equity.

If you have positive equity on your vehicle, you're in the clear and stand to profit from a sale. 

But if you're upside on your loan and have negative equity, you'll actually owe money if you move forward with the selling process.

When selling a car with positive equity, the buyer can pay your lender, who then writes you a check for the difference between the payoff amount and its market value. The purchaser can also make separate payments to both you and your lender for the loan payoff amount and price of the vehicle, respectively. 

But when you sell a vehicle with negative equity, you'll pay money out of pocket to finish the transaction. In this scenario, the person buying your car pays the sales price to the lender, and you write a check for the additional amount owed on the loan.

When it's time for a new car, you'll probably want to sell or trade in your old one. But selling or trading in can be a hassle, and how can you be sure you receive a good price in return? At Shift, all you'll have to do is enter the make, model, year, and mileage on our easy-to-use website, and you'll instantly receive a purchase offer that's valid for seven days. You can get a fair offer, better than any dealership, driven by powerful machine-learning algorithms and tons of data. And when you sell your car to Shift, there is no need to spend the extra time waxing and washing the car. A little dirt won’t affect the quote, and we fully detail the cars ourselves anyway before listing them for sale.

Step 4: Trade it in

Maybe the prospect of making a private car sale doesn't appeal to you. After all, talking to prospective buyers and completing the vehicle sale can take weeks or even months. In that case, what are the details of how to trade in a car that is not paid off?

Trading in your car saves you a lot of time and work and offers the advantage of lowering the sales tax on your new vehicle purchase. Many states only charge sales tax on the amount left once you subtract the trade-in value from the total purchase price. This gives you the chance to save many thousands of dollars and keep vital funds in your bank account for other obligations.

Like selling a car with loan payments left, whether you hold positive or negative equity on your vehicle plays a significant role in how much money you receive or owe.

With the easy process of trading in a vehicle, you don't have to fill out time-consuming paperwork, and if you have positive equity on your car, receive money to put toward your next one.

But if you hold negative equity on your vehicle — also referred to as being "upside down" on a loan — you'll actually have to pay extra to complete the trade-in. Another option is rolling your negative equity into the loan for your next car, but that increases your financial obligations over time. 

Though buying a used car instead of a new one can save you thousands of dollars, where can you go for used vehicles that stand the test of time? Every vehicle at Shift undergoes an extensive 150-point inspection by certified mechanics, and you get a free Carfax report for the ultimate transparency. And with Shift's best-in-industry service contracts, you know your vehicle's good to go year after year, mile after mile.

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Author
Shift Editorial Team