How do I sell a car that's financed?

May 5, 2009 8:20 PM

How do you sell a car when you owe the car company money?

I am moving and I need to sell my car. I owe more money than it is worth, but I am able to make the difference up. But what is the procedure when both parties need to pay the car company before the title gets released?

posted by twiggy32 to travel & transportation (10 comments total)

Do you mean the person paying for the car is the other party, ie: going to make up the difference owed on the car? I guess they don't want to hand over the money until the car and title is in hand so you might have to borrow to fill the gap in between. I think contacting car company X would be the best place to start. Call up the financing department up and ask how to take care of the balance to release the title.
posted by jilld at 8:31 PM on May 5

THe best route would be for you to pay off the whole loan, then get the title and sell the vehicle. But, at least in my experience, if you had the money to do that, well...

It's not legal, but a common route when you want to get out from underneath car payments is to sell it as cheap as you can afford (by which I mean, make it a deal), explain the situation to the buyer, and leave him or her your plates until the payoff has been processed and the title has been mailed. Which takes about 3 or 4 weeks.

Though it's risky to let someone else drive with your plates, they have a vested interest in not getting pulled over or damaging the car. Getting caught could result in serious fines, I imagine. But I did it once, and I know plenty of others who have. Calculated risk.
posted by M.C. Lo-Carb! at 8:39 PM on May 5

No intelligent person will buy it if it's under finance. And it's not like its a seller's market. You need to pay off the loan.
posted by mattoxic at 9:04 PM on May 5

Until recently, auto lenders were willing -- often even happy -- to allow you to add the remaining balance on your existing car to the loan you took out for the new car, but because of the economic conditions, they're no longer anxious to do that. That rollover of the existing balance was so common that, judging by questions Bankrate receives from readers, people are likely to be surprised and disappointed to learn that they really do have to pay off the old loan....

That's where cash rebates come in. Even as automakers accept bailout cash from the government, they offer rebates as a common escape hatch for upside-down buyers. That is, instead of putting the cash rebate directly toward the new vehicle, buyers can use it toward paying off the loan on their trade-in. That's one reason why cash rebates are the discount of choice for many car companies. -- Bankrate
posted by dhartung at 9:46 PM on May 5

M.C. Lo-Carb! can you please expand on your answer? I really do not understand your answer at all (and the topic is of great interest to me because I have a friend in this same situation). How would selling the car and allowing the buyer to use your plates solve the situation? Doesn't the seller still have to make up the difference for the loan?
posted by naplesyellow at 10:46 PM on May 5

Presumably the money the new buyer paid goes to paying off the loan.
posted by defcom1 at 11:03 PM on May 5

Since you are able to pay the difference between loan balance and market value, there shouldn't be objections from your creditor. Why aren't you just asking them?
posted by randomstriker at 11:43 PM on May 5

Exactly -- the buyer pays the asking amount, then you, the seller, contribute the rest to pay off the loan, send it all to the loan company and wait for the title. Meanwhile, the buyer has the car, and is driving it around (insured, of course) with your old plates on it until you send him the title, then he can get his own plates. This only works if you a.) aren't trying to actually make any money on the deal, and b.) if the car is somewhat desirable, especially in this market, to make it worth the buyer's hassle.
posted by M.C. Lo-Carb! at 6:11 AM on May 6

If you are selling to a dealer, they will take care of it. You call the finance company and get a payoff amount. Let's say it's $10,000. The dealer offers $8000. You give them the car and the keys and $2000, and they handle it.

If you are selling to an individual, you have to do as others suggest- first, pay off the loan so that you actually own the vehicle. See if the finance company can expedite sending the title back to you. Once you have the title with the lien released, you can sell the car. In this scenario, unfortunately, you have to come up with a significant amount of cash to bridge the gap. What you might have to do is go to a bank and explain what you are trying to do, and get a short term unsecured loan to bridge the gap.

(At least in Illinois, I assume it is similar in other states, you don't have to get a new title when the auto lien is satisfied- you'll get your original title in the mail with a letter stating the lien is released, and a signature on the title stating that the lien is released. That is a valid title. You only have to get a new title when the listed owner changes.)

(Note about license plates- some states do it different than others. In some states, the plates belong to the *person* and can be registered to any vehicle. In states like this, you keep your plates when you sell the car. In others, the plates belong to the car and go with the car when you sell it.)
posted by gjc at 6:44 AM on May 6

Actually, if the bank or finance company has a local location, the easiest thing to do is make an appointment and do the transaction at their office. But even if they don't, involving the company that holds the title really is the easiest and most above board way to take care of this. It really isn't such an uncommon situation.
posted by j-dawg at 7:39 AM on May 6