Yes, you can sell a car that you're still financing, but the process is more complex than selling a car you own outright. The critical factor is that you do not hold the title; the lender does until the loan is paid in full. Therefore, the sale proceeds must first be used to pay off the remaining loan balance with your lender. The key is understanding your car's current market value versus your loan payoff amount.
If your car is worth more than what you owe (you have positive equity), the sale is straightforward. The buyer's payment covers the loan payoff, and you keep the difference. However, if you owe more than the car's value (known as being upside-down or having negative equity), you must come up with the difference in cash at the time of sale to fully release the title.
Steps to Sell a Financed Car:
- Determine Your Payoff Amount: Contact your lender for the exact payoff quote, which is often slightly higher than your current balance due to accrued interest.
- Know Your Car's Value: Use resources like Kelley Blue Book (KBB) or Edmunds to get a realistic cash value for your car's condition, mileage, and location.
- Coordinate the Transaction: For a private sale, the safest method is to meet the buyer at your lender's local branch. The buyer pays the lender directly, the lender releases the title, and you receive any surplus. Alternatively, you can use a third-party escrow service. Selling to a dealership is simpler, as they handle the payoff directly with your lender.
| Scenario | Car's Market Value | Loan Payoff Amount | Outcome & Action Required |
|---|
| Positive Equity | $18,500 | $15,000 | Proceeds cover the loan. You profit $3,500. |
| Negative Equity (Upside-Down) | $15,000 | $18,500 | You must bring $3,500 cash to the closing to cover the shortfall. |
| Break-Even | $17,000 | $17,000 | Sale covers the loan entirely, with no cash leftover for you. |
