How to Sell a Car With an Owner Finance Contract

If you've decided that it's time for an upgrade to your car, you've got a choice: Trade in your old ride to a dealership or sell it privately. Selling a car privately can be a bit more hassle than just bringing it over to the dealership, but a private car sale is also likely to leave you with more money in your pocket. Selling your car with an owner-financing contract can make it a more appealing purchase for buyers and get you a bit of extra cash over time. However, there can be some risks involved, so it's important to understand the process fully in order to protect yourself.

Is An Owner-Finance Contract Right For Me?

Selling your car privately generally gets you a higher price than what you would get from a trade-in. If you don't need the money up front, offering owner financing can be a way to get a little more cash. Under an owner-financing agreement, you set a sales price, interest rate and repayment terms with the buyer. The buyer takes the car and pays you as the contract dictates. Once the loan is paid, you sign the title of the car over to the buyer.

Drafting a Promissory Note

If you decide of offer owner financing on your car, one of the most important steps to protect yourself is to have a promissory note. This is a legal document that you and the buyer both sign that outlines the loan amount, the interest rate, the repayment terms and what happens if the buyer does not adhere to the agreement (usually that you have the right to seize the car).

In order for your promissory note to have legal standing, you must include specific information, so it's a good idea to find a reliable template or to consult with a lawyer. Once the note is drawn up and each party agrees to the terms, the buyer, seller and a witness should all sign the note and keep a copy. It's also a good idea for all parties to keep a copy of payments made on the loan.

Completing the Sale

A car title dictates who has legal ownership over the vehicle. Once the buyer has paid off the loan, thus fulfilling the terms of the promissory note, it is time for you to sign the title over to him, making the buyer the legal owner of the car. Exactly how you sign over the title will depend on the state in which you are located, so it's best to check your local laws to make sure that it's done correctly. The buyer should also get a bill of sale at this time. This document includes the name of the buyer and seller, the location where the sale took place, the final price of the vehicle and details about the car including its make, model and vehicle identification number.

Selling a car with an owner-finance contract might seem intimidating, but the process is fairly simple and can benefit you in the long run.

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