Can I Sell A Car With Outstanding Hire Purchase Finance
In the case of a, you cannot sell the car until the loan is repaid because the lender is the vehicles legal owner until the last payment is made.
The only way to sell such a car is to repay the loan early. To do this, you need to agree with the lender on the amount of early repayment and pay it in one payment and then the loan will be considered repaid.
You can also return the car to the lender but only if you have paid less than half of the total amount specified in the contract. If you paid more than half of it, including all the interest and surcharges, you cant take the car back.
There is another nuance. Your contract may have a voluntary cancellation clause. Under this clause, you usually do not have to pay any interest. However, what you will definitely have to pay is an early termination fee. The percentage of the fee may also vary depending on your circumstances.
How Much Money Is Your Car Worth
Hold your breath. Its time to see where you stand.
Use resources like Kelley Blue Book and Sell My Car Colorado to check the overall value of your vehicle. You can even keep a close eye on your cars model on private selling sites like Facebook and Craigslist. Basically, you want an estimate on what your car is selling for.
Remember that there are multiple values for your car, depending on the path of sale. Your private party, retail and trade-in values may all be drastically different. While you may have figured youd trade-in your car to speed up the process, you may benefit more by going through the private selling process.
Furthermore, make sure to be brutally honest about the condition of your vehicle. Youre not attempting to upsell your car with a pat on the back and a good waxing. When looking up the value, keep the state and mileage of the vehicle valid. Sources like Kelley Blue Book have condition status as an option. Use it correctly. Precise numbers!
Now, for the moment of truth. Take the estimated value of your car and subtract it from your loan payoff amount. Whats the difference?
You may come out in the negative. This is to be expected in some cases depending on the cars market value or loan conditions. Youre getting out of your current payments. It may not be a win-win for both parties. Keep that in mind when deciding if you are truly going to sell your car when you still owe money on it.
Can I Sell A Car If I Still Owe Money On It
At some point, we all make big purchases. Whether we invest in a house, pay for a vacation, or purchase a vehicle, we all choose to splurge every once in a while. Sometimes, we need a bit of extra help to afford these large purchases, so its common for many individuals and families to take out loans to purchase their big-ticket items.
A lot of people use loans and payment plans to buy a car. In fact, according to Statista, 85.5% of buyers financed their car purchases in the second quarter of 2020. For most people, buying a car outright either leaves them with too little savings or none at all.
Because financing is the primary method of payment for cars, it stands to reason that a customer may want to sell their vehicle before it is completely paid off. Whether this is because of a change of heart, change of finances, or a desire for an upgrade, this situation comes around fairly often. In fact, its normal for individuals to pay off their car over a span of 6-8 years. This is a long stretch of time during which they may decide that a different vehicle is a better fit for their needs.
This often causes confusion for our clients, and many wonder if they can sell their car without owning it outright. The short answer is yes you can sell your car without having fully paid it off. However, there are some caveats and details that are important to know.
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Can I Sell A Car When I Still Owe Money On The Loan
Still owe money on your car? Youre not alone.
Around 35% of American adults are paying off a car loan. And since 2020, a record number of drivers are underwater on their auto loan – meaning, the car is worth less than the amount they still owe.
Usually, this complicates sales quite a bit. And if youre underwater on your loan, some buyers wont deal with you at all.
Making sure you get the best possible offer could mean the difference between owing money on a car you no longer own…
…Or having extra cash in hand to put down on a new car.
Not only will Get400More.com buy cars with active loans, we also make sure you get the best possible offer for your underwater loan, so you can get out of your old car as painlessly as possible.
The Bank Still Owns Your Car
It’s illegal to sell someone else’s property unless they agree to it. This might seem like an obvious point, but it’s important to remember that the bank is the legal title holder of your car.
It doesn’t matter that you’re the one paying the license fees and maintaining it until the last cent you owe according to your finance agreement has been paid, your car is the bank’s property, and the only way the bank would agree to the sale is if they’ve extracted their full benefit from your original transaction.
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Can You Sell A Car With An Existing Loan
Yes, there are a few ways to sell a car with an existing loan. Keep in mind that if the sales price is less than your loan balance, you will have to pay the remaining balance on the loan. With help from lending institutions and dealerships, along with the stateâs department of motor vehicles , your options include some of the following:
- Pay off the remaining loan
- Sell your vehicle to a used-car dealer
- Sell the vehicle in a private-party transaction
- Trade the vehicle in at a new-car dealership
Find Out Your Cars Value
If youre looking to sell your car but still need to pay off your loan, find out how much your car is worth and compare that to how much you still owe, also known as the payoff amount.
You can use our Carfax Value tool to see what your car is worth the value will be based on the specific make and model of your car as well as its complete history, including maintenance work and whether damage has ever been reported. You can also see how much dealers near you are charging for cars like yours by checking Carfaxs Used Car Listings.
Depending on the value of your car and the amount left on your loan, you may owe more money than the car is worth this is called negative equity. In this case, the money you get from the sale likely wont cover your loan, so it would cost you money to sell. If you need to sell your car but cant afford to pay off your loan because of negative equity, consider consulting a debt-relief specialist. Find more information on debt relief here.
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Selling A Car Privately
With a private sale, you might get more money than you would from a used car dealer , but youd also need to take on more responsibility for managing the sale. This includes the transfer of title and payment of fees among other duties.
Steps to take include the following:
- Get the current loan payoff from the lender .
- Find out what paperwork theyll need and how they want the process to work.
- Have the buyer follow the lenders procedures when paying for the car.
From the lenders perspective, they want to ensure that they get paid. So, as just one possibility, they may have a buyer pay them the agreed-upon price for the vehicle. If its more than whats owed, then the lender could give you the overage. If its less than whats owed, you could give the bank the difference between the price and loan amount.
When selling a car with a loan privately, youll also need to handle any fees and forms with the motor vehicle department of your state.
What To Do When The Bank Wants The Payoff Before You Sell Your Vehicle
The lender will require the full payoff amount before releasing the title to the buyer. If you have positive equity, the lender will send a payment for the difference. If you have negative equity, youll have to pay the lender the rest of the payoff amount before the new buyer will get the title.
When the bank wants the payoff before you sell the vehicle, you have a few options.
Refinance your current loan
You could lower the interest rate or extend the loan term to make the payments easier to manage. Refinancing to a lower APR could help you build equity faster so you could move into a positive equity standing or at least have less negative equity.
Get a personal loan
You can get a personal loan to pay off the auto lender so you have possession of the title. Then you can sell the car and use the proceeds to pay off the personal loan. If you dont pay off the full balance, you will have to make payments on the personal loan until its paid off. Keep in mind there will be fees associated with getting the personal loan, so compare the cost of the fees with your other financing options.
Use your savings. Pay the remaining loan balance with your savings. Of course, youll have to have enough cash on hand to pay the difference.
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Can You Sell A Car Without A Title
A title serves as proof of ownership, and in most cases, you can’t sell a vehicle without proof of ownership. If your title was lost, damaged, or stolen, you should replace it. If the vehicle is abandoned, contact your state’s department of motor vehicles to find out how to proceed. Some old vehicles may have a bill of sale rather than a title, which can also be used to sell a vehicle.
Know What Your Car Is Worth
Next, youâll need to research the current value of your vehicle. With the general supply-chain issues due to the Covid-19 pandemic, the industry is experiencing a scarcity of new carsâwhich means the market is hot for both new and used vehicles.
You can easily find out the present value of your car by visiting a vehicle valuation site like Edmunds, Kelley Blue Book or Cars.com. Youâll need to know the year, make, model, your zip code and overall condition of the vehicle. Vehicles less than three years old hold greater value, but even vehicles up to five years old are in demand.
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You Can Sell A Car That You Financed And Still Owe Money Onhere’s How
The Balance
Selling a car can be complicated, and its even more intimidating if you financed the car and still owe money on the vehicle. It is slightly easier to sell a car that you own free and clear, but you have several options when it comes to selling a financed vehicle. The easiest way to sell a car that you bought through financing is to pay off the car loan during the sale of the car in order to clear the title.
The specific course of action you take will depend on several factors, including where your loan is held and whether the purchaser is a dealer or a private buyer. Here are the steps you can follow.
Roll Your Car Loan Over
You always have the option of rolling your old loan into a new car loan and trading in your current car. Although this option will make your financial position even worse, you will at least have the benefit of a new car that will hopefully retain more of its value.
Talk to your dealer about financing with them. Most banks will not finance a new car loan for you if they need to loan you more than 100% of the value of your new car. Once you have your new car and loan, you can always refinance with a bank after paying the loan down to an amount that comes out to less than your car’s market value.
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Refinance Your Car Loan
You can try refinancing your existing car loan so that you have a lower interest rate and smaller payments. If you want to pay it off more quickly, you can shorten the loan’s term, or you could increase the amount you are currently paying yourself and pay off the loan faster. You can also lower your car payment by stretching out the refinanced loan for additional years, but you’ll also pay more in interest. And, if you have missed payments, you may not qualify for a car loan.
Have Someone Else Take Over Payments
Finally, you can try to find someone to assume your loan payments along with the car. You can advertise in market places such as Craigslist and eBay Motors to find potential buyers.
The person who buys the vehicle would assume ownership of the vehicle and they’d assume responsibility for the loan as well. But the dealership may require them to apply for financing, complete with a credit check, before they can take over the loan. If they don’t have solid credit, this option might not be doable.
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You Have To Close Your Loan
You will need to close your loan to sell your vehicle. This means settling your debts with your loan officer.
Just because you wish to sell your vehicle doesnt mean that your debt on it disappears. When you agreed to the loan terms, you agreed to pay the amount owed plus interest. Your loan servicer or bank still expects that you pay them back.
Different institutions have different methods for paying off a loan. Reach out to the bank, credit union, or dealership that helped you finance your car, and they will let you know what to do.
How To Sell A Car Under Finance
So how exactly do you sell your car if you still owe money on it? Its important to take each step carefully to avoid any issues with your lender. Before you can sell your vehicle, you need to pay off the loan fully. In the best-case scenario, this will happen all at once.
You have two options:
- Pay off the loan before selling The simplest thing to do is to pay off your loan completely before you sell your car. This means you dont have any outstanding liens against the car, and the title transfer will be a smooth process. This is also most attractive to buyers, and you might even get a better price for the vehicle.
- Pay off your loan during or after the sale If you dont have the cash to pay your loan prior to selling, you can get whats known as a payout letter. This is a document from your lender explaining how to complete the payment. You can then begin the payment process during or immediately after the sale to remove the outstanding balance.
If you still owe money on the car, you wont have a clear title at the time of sale. This could be off-putting to some buyers, so its helpful to have a payout letter to prove the amount you owe is what you say it is. Another option is to sell to a dealer, not an individual. Dealers are familiar with auto loans, and they are more comfortable working with you through this process.
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Ease Any Buyer Concerns
Those looking to sell a car while the bank holds the title will have to do a little more legwork, but its not impossible. Just be sure to go out of your way to ease the buyers concerns.
After all, the buyer is spending a large amount of money and he or she is acting on your word that youll send along the title.
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Use An Escrow Service
If youre not in a negative equity situation, once you have a buyer youll have to pay the money you still owe on your car before you can transfer the title. This, of course, creates a dilemma: If you cant give a title to your buyer, theyre not going to give you money.
This is where an escrow service comes in. Escrow brings security and protection to everyone involved. An escrow service will assume the responsibility of overseeing your loan payments, and it will handle the paperwork involved in the sale, dealing directly with your lienholder to facilitate a swift title transfer.
Once its used the buyers funds to pay off your loan, the escrow service will release whatever is left to you. The drawback of using an escrow service is that it isnt free, but the fee is typically quite small often roughly 1.5% of the vehicles sale price, or $150 on a $10,000 transaction.
Another option is for the buyer to pay your outstanding loan balance directly to your lender. The best way to do this is at the lenders office: The buyer hands the lender a check, and the lender turns the vehicles title over to the buyer. The buyer then gives you the remaining amount.
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