You can sell your car before you finish paying off your loan. However, if you owe more than the vehicle's sales price, you must pay your lender for amount still due on the loan to release the vehicle's lien. If you can sell your vehicle for more than its loan balance, you may keep the profit.
Budgeting for the Sale
Check your vehicle's value at Edmunds.com and the Kelley Blue Book website to determine a fair selling price for your car or the car's private sale value. Call your lender for your loan's exact payoff amount including its per-diem, which is the amount of interest added to your loan balance daily. If your target selling price is more than your loan's payoff amount, you must have the rest of the money required to satisfy the loan. Before you advertise your car for sale, have your funds ready to satisfy the loan if needed.
Arranging for the Loan Payoff
Whether you owe excess money toward your loan balance or not, find out about your lender's payoff process before selling your car. This way, you can efficiently work a buyer to sell your vehicle. If your bank is not local, for example, you may find that it takes up to two weeks to obtain a lien release or title for your vehicle. If your bank is local, you may be able to obtain a lien release immediately and transfer ownership to your buyer the same day. Otherwise, your buyer will want to know when he can receive his purchase paperwork.
Working With a Buyer
You don't have to advertise that your vehicle still has a loan balance when trying to sell your car. Once you have an interested buyer, explain the payoff and title transfer process that your lender described to you. Some buyers may not want to wait several weeks to obtain a car's title. If your lender is local, bring the buyer with you to complete the loan payoff. This way, the buyer can receive the necessary lien release to transfer ownership. Include the buyer in the payoff process by allowing him to pay your lender directly.
Significance of a Lien Release
Some states allow title transfers while a lien exists on the title. When you pay off your auto loan, the lender will supply you with an original lien release printed on bank letterhead. It is also signed in ink by a bank representative. You must provide the buyer with the original copy to release the title's lien. In states that don't allow title transfers when a lien exists, the lien release is a requirement. Make a copy of the letter before you give your buyer the original.
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