How to Sell a Car When the Bank Still Owns Title

A key and key fob sit on top of a California state car title.

If you need to sell a car, it can be a hassle if the bank still owns the title. When you are making payments (financing) a vehicle, ownership technically lies with the bank until the day the last check is sent in. But there are ways to get around this if you need to sell a car. It may take some time, but here are a few options to consider.

Trade it In

If you are wanting to sell the car so you can purchase a different vehicle, trading in the car may be your best option. During the trade-in process, the new dealership will be aware that the car is still being financed. If the car is in great condition, and they feel they can sell it easily, they will pay off your existing loan to claim ownership and put part of the value toward another car for you. This will eliminate any need for discussion between you and your former financier, aside from getting the payoff value and signing some basic paperwork.

Do a Finance Take-Over

Another option for selling a car while you still owe money is to have someone take over the financing terms. With this option the bank will transfer the loan to a third party. To take advantage of this, you need to find a party who will qualify for the same finance terms through the existing bank. The downside to this is that you won't make any money on the sale; however, it's a good option if you are struggling and facing repossession, as it will save your credit some damage.

Sell it Outright

If you aren't in a dire situation and can spend a few weeks doing legwork, you can sell the car privately. If you are able to find someone to pay cash for the sale amount, you can have a cashier's check sent directly to the finance company for the payoff, while the rest of the sale value is made out directly to you. Once the bank has received the money, you can request a clean title be issued to the new owner. This process can take a few weeks, so both you and the buyer will need to be patient. If the bank is local, this can speed up the process since the paperwork can be filed at a local branch. Once the clean title has been issued, you will need to sign it over.

If the potential buyer is going to finance the car through their bank or another finance company, then you have to have both banks involved. The buyer's institution will issue the payoff directly to the current finance company on their behalf. Your company will then turn the title over to the new finance company, instead of to the buyer. Once that's done, it's out of your hands and you no longer need to worry about it.

Selling a car that is bank-owned isn't terribly difficult. People do this every day. It does involve some paperwork and some extra time, but if you are ready to get rid of the car, it's worth the effort.