Can a Financed Car Be Sold?
3 Answers
A financed car can be sold, but the sale is not unrestricted when the loan is not fully repaid. This is because the vehicle is mortgaged to the bank during the loan period, and a vehicle with a mortgage registration cannot be freely bought or sold. When selling a financed vehicle, you can choose to complete the sale after the loan is fully repaid, or you can request the buyer to settle the outstanding amount in advance—both methods are viable for the transaction. Currently, most car financing agreements use a retention of title arrangement, meaning the ownership of the car remains mortgaged and does not belong to the consumer until the full payment is made. Due to this, there are frequent cases where consumers are deceived by unscrupulous car dealers.
It is indeed possible to sell a car that is still under a loan, but there are several key steps to follow. A car under loan means it is mortgaged to the bank, and you do not fully own it yet. Therefore, to sell it, you must first pay off the loan to release the mortgage. If you don’t have enough cash to repay the loan, the simplest method is to negotiate with the buyer. Have the buyer send you part of the payment to settle the loan, and then proceed with the ownership transfer after the bank issues the loan clearance certificate. I’ve seen cases where this step wasn’t handled properly, leading to complications at the vehicle registration office and disputes between the buyer and seller. Although the process can be a bit complicated, seeking help from a professional used car dealer can make it much easier. They are familiar with the process of advancing funds to repay loans, though they may charge a service fee.
I've also sold a car with an outstanding loan before, with eight months of payments remaining. First, I calculated the remaining principal and the early repayment penalty, then listed it on a used car platform clearly marked as 'selling with loan.' After the buyer inspected the car and agreed on a price, they paid me 60% of the amount to settle the loan early at the bank. With the release documents in hand, we went together to the DMV to transfer ownership, after which they paid me the remaining balance. The whole process took about five days, with the most troublesome part being waiting for the bank to process the repayment proof. The key is to sign a detailed contract, clearly outlining responsibilities at each step—no verbal agreements. If the loan balance is higher than the car's value, it gets a bit tricky, as you’ll need to cover the difference yourself to proceed with the transaction.
