How to Sell a Financed Car that is not Paid Off

how to sell a financed car

There are many reasons why people want or need to sell a financed car that is not paid off. Some are anticipating an expanded family and need a bigger vehicle. Others are moving far away and cannot take their current vehicle with them. Some realize they made a mistake and bought a car that’s just not right for them, or is too expensive. Whatever the reason may be, knowing how to sell your car when you still have payments left cam be an especially tricky situation. Here is an action plan that will help you handle selling a car you owe money on:

Get Your 10-Day Pay-Off Amount to Sell a Financed Car

financed car pay off

The very first thing you need to do is find out the accurate amount you still owe on your car. The easiest way to do this is to call your lender and have them give you a pay-off figure. Note that this number will not be the same as the outstanding balance from your last statement. The interest on your car loan accrues daily, so the pay-off figure keeps changing. But the 10-day pay-off figure from your lender includes the interest that will accrue over the next ten days. While you’re at it, be sure to also ask your lender if they have any particular procedures you need to follow if you want to sell a financed car to a third party. This is especially important because you don’t have the title to your car – the lender has it as long as you still have payments left to make. You want to know what’s involved in selling the car and getting the title to the new owner as quickly as possible.

Your 10-day pay-off figure is a key piece of information, it’s also just the first step in figuring out how to sell a car that is not paid off. The next thing you need to know is what your car is worth.

Get an Accurate Value on Your Ride

car value

Putting an accurate value on your car is important, and there are different ways to do it. One way is to use online tools such as Kelly Blue Book Value and Edmunds True Market Value. Note that these are not firm valuation tools, they are quick-and-dirty guidelines that serve as a starting pint. For these numbers to be useful even as imperfect guidelines, be as accurate as possible when you select what condition your car is in because it does make a substantial difference in the ranges you’ll see. For more information on how to value your car, read out step-by-step guide on how to value your car.

At Kelly Blue Book, you’ll get two different numbers: One is trade in to a dealer, which is what they think you might be offered from a dealership on a trade-in deal and the other is sell to a private party, which is what they think you might be able to get if you sell the call privately on your own. At you’ll get three different numbers: Trade-in, private party, and dealer retail, which is what dealerships are selling your car for after reconditioning it.

But those are just rough guidelines, which is why they’re usually stated as a range. If you want to get a more accurate view of your car’s value, you’ll have to do a little more legwork based on the local market where you are located. Once again, however, the Internet is your friend. What you want to do is search through used car classifieds to find vehicles that are as close a match to yours as possible. You can use sites like Kelly Blue Book, AutoTrader,, CarGurus, and others. Keep your search parameters as tight as possible to your geographic location, and only expand the scope of your search if you’re not finding enough comparable vehicles. You want at least five strong matches to get an accurate result. You’ll probably get five different prices, so put them in order from highest to lowest and value your car in the middle of that range. Avoid the lower end of the range because you’re leaving money on the table, but don’t go right to the high end of the range either because many potential buyers will pass you by for better deals.

Knowing how much your car is worth and what you still owe on it means you can now figure out where you stand financially with this particular vehicle.

your car for sale

Options When You’re Underwater on Your Loan

negative equity underwater on your car loan

Now that you know how much your car is worth and how much it would take to pay off your car loan on that vehicle, it’s time to look at how those two number compare. If your pay-off amount is more than what your car is worth, this is what it means to be underwater or upside down on your loan. It’s also called negative equity. Those all sound bad, don’t they? But don’t worry, even though you it sounds bad, you’re not alone. According to in More Car Shoppers Are Underwater on Their Trade-Ins Than Ever Before, a full third of trade-ins towards a new vehicle were underwater, to the tune of $4,800 on average. And the same is true for people trading in towards used car purchases as well, where 25% had an average negative equity of $3,600.

A. Be Careful if You Trade it in

The biggest danger you face when you’re underwater is making the situation worse. Dealerships will happily roll the negative equity from your trade-in into your financing on the next car you get. If you owe $15,000 but your car is only worth $10,000, you’ll be tacking that $5,000 difference onto your new loan. It’s easy, fast and doesn’t require you to dish out any cash up-front. But your monthly payments will be higher and you’ll be paying interest not just on your new car, but also on what you owed from the trade-in. If you do this over time as you move from car to car, the debt snowballs and can become unmanageable. If at all possible, your best bet is to stick with the car you have until you get your head above water, meaning you at least hit the break-even point on your loan. Even better is paying it down enough so your car is worth more than what you still owe, either by hanging onto it or making extra payments. If you are planning to trade in you car, read our guide on trading a car is when it is not paid off.

B. Selling Privately on Your Own Will be Difficult

If you’re underwater on your loan, a private sale is going to be tricky. Many potential buyers won’t like the fact that you don’t have the title. The payment the buyer would make to you won’t pay off the loan, which means you have to kick in the extra in order to free up the title. It can be a real headache that most won’t want to deal with, but your lender is a local bank or credit union, you and your buyer can sit down with them and work it out.

C. Leasing May be a Good Option

This is one situation where it might make sense to go with a reasonable lease for your next car. Yes, you’ll still have to roll that negative equity into your lease, but then after the typical three-year lease period, you’ll no longer be upside down. And if you can find a good lease deal (lots of places run specials such as $199/month lease deals), the monthly payment might not be too bad. Of course, at the end of the lease, you won’t have a vehicle to use as a trade-in towards your next car, so you’ll either have to do another lease or finance your next car purchase.

D. Don’t Shoot Yourself in the Foot

Some people try a different strategy. If they’ve been saving up money for a down payment towards their next car, they wonder if that money would be better spent paying down the negative equity on their current vehicle. It seems logical, but it doesn’t tend to save you as much you might think. And if you need to qualify for a new car loan and your credit is shaky, many lenders will want you to make a substantial down payment before approving your loan, in which case you’re better off using that money for the down payment and not paying down your current loan.

Those are the range of options for how to sell a financed car when you’re underwater on the loan. What about being above water on your loan?

your car for sale

Options When You’re Above Water on Your Loan

equity in your car

The two most common options people consider when it’s time to sell a car that you still owe money on are trading it in at dealership towards your next car or selling it privately on your own. Each has its advantages and disadvantages, but there’s also a third option you might find appealing.

A. Trade-In at Dealership

You probably noticed when you were checking what your car is worth that the low end of the range is what you’re likely to be offered on a trade-in deal at a dealership. If squeezing the most money out of your car is your top priority, trading it in at a dealership is not going get you what you want. However, the big advantage of the process is how convenient, smooth, and easy it is. The whole thing can be taken care of in a day – especially if you already know what you want for your next car. The dealership will handle all of the paperwork for you, and even if you don’t have the title because you still owe money on it, the dealership will take care of that as well, paying off the balance owed to your lender and obtaining the title. The only issue, as mentioned above, is that if you’re financing your next car and you have negative equity in your current vehicle, that will have to be rolled into the loan for your next car.

B. Selling Privately on Your Own

There’s no way around it – selling your car privately on your own can be a long, stressful process. To do it right, you have to be willing to go through the following:

Prepping a car for sale: You have to clean it up and make it look great by either doing an extensive DIY interior and exterior detail job or shelling out a couple hundred bucks to have it done professionally. You’ll also want to complete any service that’s due or make any repairs that ought to be done.

Lining up documents: You’ll have to put some time into making sure you have everything on hand that most buyers want to see, like the title, service records, repair records, vehicle history report, extra keys and remotes, etc.

Crafting a great ad: You have to spend time crafting the perfect ad to sell your car, including a catchy title and all the right information in the body of your ad. If you don’t have decent writing skills, this can be a very frustrating process.

Capturing good photos: The more snapshots the better, so you’ll want to take anywhere from 12-24 high-quality photos of your vehicle to show every angle and detail, just like the dealerships do it.

Publishing your ad: You have to figure out where to post your ad, and how many places to post, and many of them will not be free.

Answering inquiries: You have to deal with all the people who contact you about your car. You could get dozens of inquiries, maybe more. Do you know how to screen these in a way to weed out the dealers, time-wasters, and scammers?

Meeting potential buyers: Any number of these people will want to move on to the next level, which is making an appointment to see the car and/or test-drive it.

Wrapping up the sale: If you do end up selling to a private buyer, you have to figure out how to safely accept a payment and then complete the proper paperwork to transfer ownership to the buyer, and this will involve at least one trip to the DMV.

And that’s not even mentioning knowing all the different ways scammers will try to take advantage of you. You take on a number of risks and potential liabilities when you sell a car privately. Find out more in our article on how to limit risks when selling your car privately. It’s an important article to read because of you don’t properly handle the legal details of selling your car, you can be held liable for what happens with the vehicle even after you think the sale is a done deal.

It’s also important to keep in mind that the industry average for selling a used car is 60 days. You might get lucky and sell your car faster, but expecting to sell quickly is not realistic. And if your car isn’t paid off, it will take even longer and be more complicated. Most private buyers want to see that you have the title in hand, free and clear. But if you are still making payments, it’s the lender that has the title. You should mention this up-front in your ad. If you don’t, you’ll end up wasting a lot of time on people who are interested until they find out you don’t have the title. There are many private buyers who don’t understand they can safely purchase a used car privately from an owner who is still making payments. It’s become a kind of red flag for many that will cause them to pass over your ad.

Part of the problem here is that if the potential buyer needs to finance their purchase of your vehicle, their lender probably won’t approve a loan if you don’t have the title free and clear. None of this makes it impossible to sell a financed car privately, but you’ll have to be patient enough for the right buyer to come along who truly understands how it works and is comfortable with the process.

The best way to handle selling a financed car to a private buyer is to conduct the transaction at your lending institution. Getting your lender involved in the process makes the whole thing more formal and legitimate. Hopefully, your lender will allow the potential buyer to pay them directly the price you’ve agreed upon and they can apply the payment towards paying off your loan. If the price is more than the pay-off amount, the buyer will make two payments, one to the lending institution that pays off your loan, and one to you for the difference they still owe you.

If your lender does not have a local location, the process is even more complicated. You can transfer the car to the buyer at the DMV with a temporary operating permit until the loan is paid off and the title can be mailed to the owner. Unfortunately, that can be a lengthy process that takes weeks, or you might have to pay an extra fee to expedite the title transfer.

If you’d like more information on how to make the choice between a trade-in or private sale, see our article on selling your car yourself versus trading in.

C. Selling Your Car to Driveo in San Diego

Here’s a piece of really good news in what might otherwise feel like a pretty bleak situation if you need to sell a financed car that isn’t paid off. You’ve seen the low-ball offers you’ll get if you try to trade-in your vehicle at a dealership. You’ve also seen the long list of everything you have to do and the risks you run when trying to sell privately on your own. If you’re thinking neither of these options are what you’re looking for, there is a third way: Sell your car to Driveo!

Most dealerships with used car inventories don’t get enough trade-ins, so they supplement what they have with vehicles they purchase at the wholesale auctions. But cars coming from those auctions go through a lot of different steps, and all along the way there is someone who needs to make a little money on their role in the process. When a used car gets traded in, if the dealer doesn’t want to re-sell it on their lot, they’ll sell it to a wholesaler and the wholesaler will sell it at an auction. The dealer needs to make money, the wholesaler needs to make money, the company that transports the vehicle to and from the auction needs to collect a fee, as does the auctioneer. And then the dealer who purchases the vehicle at the auction is also looking to make money. As you can see, it’s a complex chain of transactions. The problem with buying inventory at the auctions is that we don’t get a chance to give it as thorough an inspection as we’d like, so we’re not sure what we’re getting. This is why Driveo is focused on buying cars directly from owners, cutting out all those extra layers of middlemen that waste money and time. That’s how we can pay you more for your car than you’d be likely to get if you do a trade-in deal at a dealership.

It’s a great way to get all the advantages of a dealership trade-in, such having all the paperwork handled for you in a very fast and convenient transaction while at the same time pocketing more money for your ride. Here’s how it works:

Tell Us About Your Vehicle: Driveo has a short online form that walks you through a few basic questions about your car and its condition. Include photos and the VIN number if you want, but you don’t have to.

Get a Fast Quote: We’ll appraise your car based on the information you provide and email you an official Driveo quote, usually in just minutes. Even though it’s fast, our quotes are not automated or instant. Real people do the market research needed to come up with fair and competitive quote.

Make an Appointment: Your Driveo quote is good for 30 days (CarMax quotes are only good for a week), which gives you plenty of time to make an appointment to come in and see us at Driveo. We’ll verify your vehicle information, make adjustments as needed, and then present you with a final offer. If you like what you see, Driveo prepares a check on the spot.

Free Ride: After the sale, if you need a ride anywhere in San Diego Count, Driveo will make it happen, free of charge.

Secure, Immediate Payment: There’s no waiting period, no grace period, no third-parties handling the money – this is why we call it our cruise in and cash out process.

All Sales are Final: With Driveo, you never have to worry about dealing with an unhappy buyer if something goes wrong with the car after the sale.

Sell Your Car As Is: At Driveo you never have to worry about smog checks or taking care of needed service or repairs – we’ll handle all of that for you.

No Visits to the DMV: When you sell a car privately you might have to make multiple trips to the DMV to ensure all the right paperwork happens. Driveo handles all of that paperwork for you.

Car Not Paid off? Driveo will pay off your loan and then give you the difference between the agreed upon price and the amount owed on the loan. If you’re underwater, we can also handle your negative equity if you want to finance your next car at our Auto City dealership in El Cajon.

Stress-Free Transaction: You can skip all pain, hassles and risks of selling your car privately when you sell to Driveo.

If you want to sell a financed car that isn’t paid off yet, you owe it to yourself to get a quick online quote from Driveo – we think you’ll be pleasantly surprised at the results!