How to Sell a Car That Has a Finance Balance

The easiest way to sell a car with a loan balance is to a dealer.
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It's easier to sell a car you have paid off and hold the title on, but you can still sell a car that has a finance balance. You just need to take some extra steps. Buyers need to have the title so they can register the car; otherwise, they don't legally own it. Because you don't hold the title until you pay off the balance, the transaction is more complicated. You can sell a car that has a finance balance to a private buyer or to a dealer.

Sell to a Dealer

The easiest way to sell a car with a finance balance is to sell it to a dealer. Dealers are experienced in handling this sort of transaction. However, you might not get the best price by going that route because dealers need to give themselves sufficient margin to turn a profit when they resell the car to someone else. You can check the car's fair market value in the Kelley Blue Book to determine whether the dealer offers you a fair price. If you accept what the dealer offers you, the dealer then makes all the arrangements with your lender. The dealer pays your lender and gives you any money left. If you owe more on the car than its value, called being upside down on the loan, you will have to pay your lender the remaining balance after the sale. After the lender receives the finance balance, it releases the title to the dealer.

Be Forthcoming in Your Advertisement

You stand to make more money from a private sale than you would by selling to a dealer, but you need to do more work in a private sale to get the title released. Many buyers assume that if you are selling the car, you own it and have the title. Because you don't, it's a good idea to say so in your advertisement to avoid confusion and so you don't waste potential buyers' time. Some people do not want to enter this more complicated transaction, but others are willing to work with you.

Conduct Business at Your Lender's Office

One option you have when selling to a private party is to go to the lender with the buyer. This works when the lender is local. You can call ahead to make sure the title will be ready. The buyer can pay the lender directly and pay you the difference. Or, if you are upside down on the loan, you would pay the lender the difference. The buyer would then get the title from the lender.

Set Up an Escrow Account

If your lender is not local, you can still sell a car with a finance balance by opening an escrow account using an escrow service. The escrow service is a neutral third party that holds the buyer's money until the seller pays the loan and obtains the title. The buyer doesn't have to worry that you might take his money and not use it to pay off the loan, and you don't need to worry that the buyer provided bogus funds because the escrow service verifies that the funds are good. You now have some time to come up with money to pay off your car loan, maybe by borrowing the money from friends or family. Because you have money in escrow, it should be easier for you to borrow the money. You can pay for the escrow service, or you can require potential buyers to pay half for setting up the escrow account.

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