How to sell a car with a loan


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When someone wants or needs to sell a vehicle but they still owe money on it, the process can be different from selling one without a loan balance — in other words, with a vehicle that’s been paid off in full. This post will guide you through how to sell a car with a loan under a few different scenarios and then will offer tips on buying the next vehicle.


Related: 7 easy ways to improve gas mileage


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How to Sell a Car You Still Owe Money On

At a high level, selling a vehicle with a loan has three main steps:

  • Gather important info.
  • Determine if you have positive or negative equity.
  • Pick a selling option.

We’ll explore each of these steps in more depth next.

1. Gather Important Info

First, get a sense of what the car is worth. This will depend upon its condition, so objectively look at your vehicle. How clean is it? How well has it been maintained? What do the body and interior look like? Examine other used cars like yours for sale and see how they’re priced.


Look at used car valuation guides. too. They will have different values for trade-ins (when working with a dealership) than for private-party sales (when selling to an individual), and will also list retail values. Look at the one that will fit the situation.


Also, verify the payoff amount on the vehicle’s loan. This will include the principal balance plus any accrued interest and is often available online or can be obtained by calling the lender. During the conversation about selling a vehicle with a loan, you can also find out how to send the payoff amount to the lender and when the lender wants to receive it (before or after the sale of the car).

2. Determine If You Have Positive or Negative Equity

The vehicle’s equity is the difference between the resale value and the amount owed on it, and this number can be positive or negative.


Let’s say that a vehicle is valued at $20,000 with a loan amount of $10,000; that car has a positive equity amount of $10,000. If, though, the vehicle is valued at $20,000 and the outstanding loan amount is $25,000, then it has negative equity of $5,000. Loans on cars with negative equity are referred to as “upside-down” or “underwater.”


So when figuring out how to sell a car with a loan, the processes will differ based on whether the vehicle has positive or negative equity as well as the selling option you select.

3. Pick a Selling Option

If you have a car with an outstanding loan balance — and it isn’t practical or even possible to pay it off — then selling a car with a loan can typically be handled in one of three ways:

  •  Selling it to a used car dealership
  •  Selling it privately to another person
  • Trading it in

1. Selling a Car to a Used Car Dealership

If a car dealership will buy used cars without requiring that you buy one from them during the transaction, then the process will probably be pretty straightforward. The dealer will offer you a certain dollar amount and, if you agree, they will pay off the lender in exchange for getting the vehicle’s title.


If there is positive equity on the vehicle, then you’ll get the money that remains after the loan balance is paid off. If it’s a negative equity situation, then you’d need to pay the difference between what the used car dealer is willing to pay and what it takes to pay off the loan.


For example, if a dealer offers $15,000 on a vehicle that has a $10,000 loan, then the dealer would take care of the loan payoff and provide the person selling the car the remaining money (minus any fees involved). In a negative equity situation, for example, if the vehicle’s value is $10,000 and the outstanding loan is $13,000, then the seller would need to chip in the difference (in this case, $3,000 plus any fees) to complete the sale and transfer the title to the buyer.

2. Selling a Car Privately

With a private sale, you might get more money than you would from a used car dealer (who needs to re-sell the vehicle at a profit), but you’d 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 (there will likely be interest owed beyond the principal amount).
  •  Find out what paperwork they’ll need and how they want the process to work.
  • Have the buyer follow the lender’s procedures when paying for the car.

From the lender’s 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 it’s more than what’s owed, then the lender could give you the overage. If it’s less than what’s owed, you could give the bank the difference between the price and loan amount.


When selling a car with a loan privately, you’ll also need to handle any fees and forms with the motor vehicle department of your state.

3. Trading In a Car You Still Owe Money On

As a third possibility, you could trade in the car with a loan balance to a dealer as part of purchasing either a new or used car. The dealer will offer a certain amount of credit for the trade-in vehicle, and if its value is more than the loan amount, that difference would go toward the purchase of the replacement vehicle.


If the loan amount is higher than the value, then the dealer may agree to combine the vehicle’s negative equity with the loan for the replacement vehicle. If this is the chosen route, the term may need to be extended to create affordable payments, and this will potentially lead to more interest being paid on the new loan.

The Takeaway

Selling a car with a loan is a little different from selling one that’s paid in full. When thinking about how to sell a financed car, it’s easier to do so if you have positive equity in your car but still can be doable with negative equity. Some options include selling to a dealer or an individual or trading in the vehicle toward another one.


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How to save up for a car


Does anything feel quite as good as hitting the open road in a shiny new car? Alright, a hot stone massage might feel better, but it’s still pretty hard to resist that new car smell. Buying a car should be a celebration, but often it can bring financial stress into your life. That’s why it’s important you take your time saving up for a car.

Learning how to save for a car may not be as fun as the road trip you’ve been fantasizing about, but it’s a necessary step if you want to buy your car in a stress-free way. We’ll break down the ways to save for a car so you can spend more time checking out roadside attractions and less time worrying about your bank account.

Related: 5 different types of budgeting methods


If buying a new car is your plan, start your research by comparing a variety of makes and models. Figure out what’s right for your needs and budget. You can visit dealerships in person or review manufacturers’ websites to research car models that catch your fancy. Don’t be afraid to ask questions! Ask car sellers to clarify any fine print in their advertisements and try your hand at haggling for a better deal.

When shopping for a car, you should take advantage of any deals you can find such as rebates and special dealership offers. You can receive quotes from multiple dealerships—make sure you ask them if the price quoted includes deducted rebates. This process may feel tedious, but it will help you learn which make and model you can afford.

Purchasing a used car can potentially save a lot of money. If you find your dream car for sale as a used vehicle, you may need to be prepared to make the purchase quickly before someone else purchases the car.

That’s why it’s important to determine how much you can spend on a used car before you begin your search. The last thing you want is to feel pressured into spending more than you can really afford because you think a good deal is slipping away.

Purchasing a used car can potentially save a lot of money.

Before you begin shopping, review the used car market for the makes and models you are considering, to get an idea of what it may cost for you to buy the used car you want.

Before you purchase a used car, it’s good practice to follow the steps recommended by for your financial and physical protection.

Steps like finding out if the car has any recalls, researching if the warranty is still in effect, and having a mechanic inspect the vehicle before making a purchase will hopefully keep both you and your wallet from being injured.


Ridofranz / istockphoto


Parting with a solid chunk of cash is never fun, but an appropriate down payment can help to make your car repayment process more manageable. There are two ways you can go about calculating your down payment:

Option 1: You can choose a make and model based on how much you’ve already saved for a down payment.

Option 2: Pick out which make and model you’d like to buy, get a price estimate, and then determine how large you’d like your down payment to be.

20% down payment is often recommended when purchasing a car, but this is not a set rule. Generally, the higher the down payment is, the lower the interest rate on your loan may be. Your down payment amount should ideally help bring your monthly loan payments to a cost you can afford.

If you have the cash flow to be able to purchase your car outright, then you can skip step three. Also, congrats, that’s a huge accomplishment! But if you can’t, there is no need to feel alone. 44% of American adults have auto loan debt.


Buying a car can cost a pretty penny. According to a report from Experian, the average monthly car payment was $554 for a new car and $391 for a used car.

If you want to determine how much your monthly car payment will be, you can sit down and crunch the numbers, or you can let the car loan calculator do the work. This calculator is designed to help you estimate what your monthly car loan payments will be throughout the life of your auto loan.

The process is fairly simple. To use the calculator, enter the vehicle price, down payment amount, trade-in value (if you are trading in a vehicle), sales tax rate, interest rate, and the rate of your loan.

The calculator will take care of the math and present you with your estimated monthly payment. Next, it’s time to figure out how to save up for a car.


Unfortunately, the need to buy a car doesn’t always happen according to schedule. An unexpected breakdown, pricey repairs, or a change in your commute can all speed up your car-buying timeline.

An unplanned car purchase can lead to copious amounts of stress and unnecessary costs.

If you are able to, one good idea is to create a savings plan in advance of buying a car so you can take your time making such a big financial decision—and it could help you find more affordable options.

An unplanned car purchase can lead to copious amounts of stress and unnecessary costs.

Steps one through three should have given you a decent idea of how much money you’ll need to save for a down payment, and how much money you’ll need to budget each month after you purchase your vehicle.

One approach to saving is to take the amount you’ve determined you’ll need for a car upfront (don’t forget to subtract any money that may come from selling or trading in your current car) and divide it by however many months you have left until your ideal purchase date.

The number you get after doing this equation is how much money you should be saving each month to meet your goal. You might also think about saving more than that per month so you can prepare for your monthly payments.

And if you’re currently driving an older vehicle that is prone to issues, you may want to save a little extra as a cushion for any necessary maintenance or repair costs. Remember, saving for a car can take longer than you’d planned and that’s okay.


Learning how to save money for a car can take a little trial and error. If you need to boost your saving efforts, consider a cash management account that allows you to spend, save, and earn all in one place.

That means the money you put aside for your new car could help you earn even more money. Happy driving!

Learn more:

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SoFi Money
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA  SIPC  . Neither SoFi nor its affiliates is a bank.




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