How to Sell a Car With an Owner Finance Contract

Finding a buyer for your car might be easier if you offer owner financing.

Finding a buyer for your car might be easier if you offer owner financing.

When you’re trying to sell a car, adding a financing option may make your car more attractive to potential buyers. While providing financing won’t give you a lump sum at the sale, it will give you steady income while the buyer makes payments. If you decide to sell a car with an owner finance contract, make sure you draft an ironclad contract to cover yourself if the buyer drops the ball and doesn’t make good on the deal.

Check the value of your car to determine your asking price. Visit the Kelley Blue Book website or the NADA Guides website and use the online tool to get an estimated private-party sale value. Alternatively, you could also look up your car in the print version of the most current Kelley Blue Book.

Advertise your car for sale in newspapers in your area and through online classified ads. Include all pertinent details about your car, such as make, model, features, mileage, recent work done, any work it needs and your asking price. Because you are offering owner financing, you may be able to add a few hundred dollars to your asking price.

Consider an offer you receive from a buyer and ask the potential buyer to get some credit information. The buyer can request a free FICO credit score from the website The buyer can also request a current credit report from each of the three major credit-reporting bureaus -- Experian, Equifax and TransUnion -- consumers can request a free credit report copy once every 12 months. Once the buyer secures a FICO score and the three credit report copies, check them over. Look for a minimum FICO score in the upper 600s to lower 700s. Make sure the buyer doesn’t have nonpayment flags on his credit report.

Check to make sure that the potential buyer isn’t overextended with a lot of debt. The website suggests that a debt-to-income ratio of more than 36 percent is too much debt. Ask potential buyers to see a copy of their most recent income tax forms or pay stubs. Add up monthly income and monthly debt to find the ratio of income and debt.

Accept a buyer’s offer if the buyer’s FICO score, credit reports and debt-to-income ratio checks out.

Draft a sales contract and promissory note between you and the buyer. Include the date of the contract and identify both yourself and the buyer by full names. Identify the contract as a sales agreement and describe the car by make, model and year. Outline every term and condition of the agreement, including the number of miles on the car, the Vehicle Identification Number and specific details about the car. Include the purchase price, the down payment, the remaining financed balance, interest rate, the monthly payment due from the buyer, the payment date each month and the date the buyer will make the final payment. Spell out all issues with the car in the contract, specifying that you are selling the car “as is.” Include the forms of payment you will accept for monthly payments and the address to which you want the buyer to send the payments. Include a grace period for payments and cancellation terms as well. Create a place for both the buyer and you to sign and date the contract.

Make at least two copies of the contract, one for you and one for the buyer.

Sign both copies of the contract and have the buyer sign both copies, too. Give one copy to the buyer and keep one copy for yourself.

Collect the down payment for the car and hand over the keys to the buyer. Keep the title -- you won’t transfer the title until the buyer finishes paying off the loan.

Keep track of the monthly payments to make sure the buyer stays current. If the buyer is late on a payment, make sure the buyer pays within the grace period or the buyer may be in default. If the buyer defaults, you may be able to repossess the vehicle under state law.

Transfer the title to the buyer after the buyer makes the final payment. Sign and date the title and hand it over to the buyer.


  • Get an attorney’s help drafting the sales contract and promissory note to make sure that you include the important details. Ask the attorney for advice to protect yourself if the buyer stops paying and to find out about your repossession rights.

About the Author

Kathryn Hatter is a veteran home-school educator, as well as an accomplished gardener, quilter, crocheter, cook, decorator and digital graphics creator. As a regular contributor to Natural News, many of Hatter's Internet publications focus on natural health and parenting. Hatter has also had publication on home improvement websites such as Redbeacon.

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