(updated 5/7/25)
So, you’ve decided it’s time to part ways with your beloved car. Maybe you’re upgrading to something shinier, or perhaps If you’re thinking about selling your car while you’re still paying off the loan, you’re not the only one. This situation is more common than you might think, and it’s absolutely manageable with the right approach. Whether you’re downsizing, switching to something more efficient, or cashing out your vehicle’s value, here’s a step-by-step look at how to get it done the smart way.
Step 1: Review Your Loan Details
Know Your Payoff Amount
Contact your lender and ask for the exact payoff figure—this is the amount you need to fully pay off the loan.
Check Market Value
Estimate your car’s current worth using reliable tools like Kelley Blue Book or Edmunds. This helps you determine how your car’s value stacks up against the loan balance.
Figure Out Your Equity Position
- Positive Equity: Your car is worth more than the loan balance.
- Negative Equity: You owe more than the car is worth—it’s not ideal, but there are still options.
Step 2: Choose the Best Way to Sell
- Private Sale: Typically brings in more money, but you’ll handle more of the logistics.
- Trade-In at a Dealership: Less hassle, but might result in a lower price.
Step 3: Prepare Your Vehicle and Paperwork
- Give your car a good cleaning, inside and out.
- Make small repairs that improve appearance and value.
- Have these ready: registration, loan payoff letter, service records, and lienholder contact info.
Step 4: Be Upfront with Potential Buyers
When selling privately:
- Let buyers know there’s still a lien on the vehicle.
- Explain how the loan payoff and title transfer will work.
Step 5: Finalize the Sale and Pay Off the Loan
Once you have a buyer:
- Set a final sale price.
- Arrange payment so the lender receives the payoff amount.
- If the sale amount covers the loan: great—you may receive the extra.
- If not: you’ll need to cover the difference.
- After payoff, the lender releases the title. Timing and procedures vary by state.
What If You’re Underwater on the Loan?
If your loan balance exceeds your car’s value, you still have options:
- Pay the Shortfall: Use savings or a personal loan to cover the difference.
- Combine Loans: If buying another vehicle, roll the negative equity into your new loan (just proceed with caution).
- Negotiate With the Buyer: In rare cases, you can reach a deal to split the shortfall.
Final Takeaway
Selling a car with an outstanding loan isn’t difficult—it just requires planning. Stay transparent, work closely with your lender, and be ready to handle a bit of extra paperwork. In the end, you’ll walk away with peace of mind (and possibly fewer monthly expenses).
Reminder: Procedures may differ depending on your state and lender. Always verify the process with both before starting the sale.
