3 ways to sell a financed car to a private buyer
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Updated on by Andrew Crowell
Selling a car with a loan is hard because you don't have a clear title that can be signed over to the new owner. Therefore, your buyer can't register the car in their name until your loan is paid off. This used to mean you either had to pay off your loan before listing your car for sale or trade your car into a dealer for a lower price.
KeySavvy lets you sell your financed car without paying it off first, but there are other ways to sell your car privately when you still owe money on it. This article describes all three so you can make the best choice for your situation. It also outlines the pros and cons of trading your car in to a dealer.
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How to Sell a Car With a Loan
Option 1: Pay Off Your Loan First
If you have the cash to pay off your loan and the time to wait for your bank to send you the title, this is an option.
Some articles suggest taking out a personal loan to pay off your auto loan. This is not good financial advice. An unsecured personal loan (i.e. there is no collateral, such as a car, for the lender to repossess if you miss your payments) is higher risk for banks. This risk is passed on to you, the borrower, as a higher interest rate. Taking out a personal loan will reduce your credit score which could make buying your next car, getting a new apartment, or buying a home, more challenging. Your credit score would be impacted even if you paid the loan off right away after selling your car.
Pros
- You can show buyers your title and give them confidence to buy. The sale will be simpler and require less paperwork.
Cons
- You have to pay your entire loan balance upfront, which could be thousands of dollars.
- You have to wait for your bank to send you the title or lien release, which can take several weeks or even months.
Option 2: Work With Your Lender to Sell to a Private Buyer
This is an option if your lender is a small, local bank or credit union. Before listing your car for sale, call your lender to see if they can support a private party sale.
Pros
- You can sell your car to a private buyer, maximizing your price
- You don't have to pay off your loan in advance. Your buyer will pay your lender directly at the local branch.
Cons
- Usually only smaller, local lenders offer this service.
- Your buyer may not receive the title right away and may be uncomfortable with the process.
- It takes longer to sell to a private buyer compared to selling your car to a dealer.
Option 3: Use KeySavvy to Sell to a Private Buyer
This is the best option if you want to maximize your selling price and don't want to pay your loan off first. It's also one of the fastest ways to sell your car if you have a loan, since you don't have to wait for your title.
Pros
- You don't have to pay off your loan in advance. The loan balance is deducted from your payout.
- You don't have to wait for your title or lien release to arrive from your bank. Your buyer can pick up the car as soon as you agree to sell it.
- KeySavvy handles the loan payoff and title transfer paperwork for you.
- You can sell your car to a private buyer on any marketplace you prefer, maximizing your price.
Cons
- It takes longer to sell to a private buyer compared to selling your car to a dealer.
- KeySavvy charges a fee of $99 to handle the necessary paperwork and work with your lender.
Sell or Trade In to a Dealer
This is the best option if you want to sell as fast as possible and are less concerned about getting the most money for your car.
Pros
- It's quick and easy. The dealership will pay off your loan.
Cons
- Trading your car in or selling to a dealer leaves thousands of dollars on the table. You always make more money selling your car yourself.
Final Thoughts
Selling a car with a loan is certainly possible and there are more choices now than ever before. Unfortunately, it's not as simple as the buyer taking over your loan payments. If you're listing your car for sale, be sure to disclose that you have a loan and what process you plan on following. Being upfront will avoid surprises that could deter buyers from going through with a purchase.
If you think you might owe more than your car is worth, take a look at our article about selling a car with negative equity.
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