How to Sell a Car You are Still Financing

A "for sale" sign sits in the windshield of a car.

Considering the cost of buying a car, most people these days finance. However, sometimes it may be necessary to sell a car that you don't own outright yet. While this can be challenging, it's definitely still possible.

When to Sell

If you owe money on a car, it's advisable to not sell it unless you have no other option. If you can't afford the payments anymore, if the car is having maintenance issues that will cost more to fix than it's worth, or you need to expand the room you have because you are expecting to increase your family size, then it may be a good idea to sell it. If, on the other hand, you just want to drive the latest machine offered, consider hanging onto it a little longer. This will help you avoid losing money on the sale.

Sell it Yourself

Selling a car yourself when you are still making payments can be tricky. It takes more time than other types of car sales, and it can be hard to find a buyer for it. Most people will want the title as soon as the money is exchanged, but you won't have it yet if the car is not paid off.

Before you advertise the car for sale, check with the Department of Motor Vehicles to find out about requirements regarding paperwork and title transfers. You will also want to check with the bank that is financing the car to find out what you need to do to have the title released to another party. Your title will have a lien on it from the bank. As long as the lien is in place, you can't transfer it.

Many lenders will allow you to transfer liability of the payments over to another party. This works well if your buyer wants to finance the car. It also helps you avoid all the headaches associated with this kind sale. If the buyer has secured financing through another lender, or is going to hand you cash, you will have to make a payment to clear the loan before the title is issued. If possible, have the new buyer give you a cashiers check made payable to the lender for the sale amount, and a separate payment for anything left over for you to keep. This will speed up the process of having the title released.


Another option to avoid the mess of selling the car to a private buyer is to simply trade the car in to a dealer as partial payment for a new car. When you trade it in, the dealership accepting the trade takes over the liability with just a little paperwork. A trade-in, combined with new car incentives and rebates, can be a smart move. You have to do some research and be careful that you aren't getting in to another loan that will put you under water, but with some basic digging, you safely decide whether or not this will be feasible.