Motor Category Motor: car insurance and finance

How to Sell a Car With Outstanding Finance

Selling a car that you do not own outright may prove difficult, but it depends how much you owe and how easy it is to get a lien release once the loan is paid.

Ideally, you should owe less than you can sell your car for.

Otherwise, you will have to come up with the balance to pay the loan. Most states don't allow title transfers if there is a lien on the title.

Call your lender to find out how much you owe on your loan. Ask for a 30-day payoff amount, which should allow enough time to sell your car. Unless you have a zero-per cent interest rate, you are charged interest daily, so be sure to extend the payoff date.

Tell the bank representative that you plan to sell your car and want to know how to get a lien release, which is an official bank notice that states the lien is satisfied and is often required for title transfers. Find out if you can go to the bank (if local) to obtain the release or how long the process should take once you pay the balance of the loan.

Find the value of your car by going to several appraisal websites. Use the Edmunds and Kelley Blue Book websites, as both will produce a different value. Make sure you check the private-sale value, and not retail or trade values, because the value differs by thousands of dollars.

Check your funds. If you sell the car for less than you owe, you must pay the balance of the loan. If not, you can keep any profit from the sale.

Advertise your car for sale. Include pictures and plenty of details. Set up test-drive appointments with potential buyers.

Tell interested buyers that there is a lien on the title, and you will be able to transfer ownership once you pay off the loan. Arrange for the buyer to go with you to your lender to complete the payoff process -- this should make your buyer more comfortable. If the bank is not local, you'll have to give the buyer a receipt that states he can have his money back if the title is not signed over within several days, or as long as your bank told you it would take to get the lien release.

Call your state's motor vehicle office if you are unsure of the requirements for selling a car. Sign your title in the designated seller's area and follow any additional state procedures once you've sold the car, such as additional forms or notarising any signatures.

Bring your payoff amount to the bank if it is local and bring the buyer with you. Provide the buyer with the lien release, or if paying a distant lender, provide the receipt that states that you will return the money if the lien release is not received. Send your payoff to the bank, and as soon as you receive the lien release, give it to the buyer.

Give the vehicle to the buyer only after all paperwork has been completed. You still own the vehicle until you complete the paperwork, which requires the lien release in most states. Cancel your insurance and return your plates to a motor vehicle office.