How to Buy a Used Car From a Private Seller When the Title Is Held by the Seller's Lender

When an individual selling a used car still owes money on his car loan, he will not have the title in hand to complete the sale with you. He needs to pay off the loan to get the lien released so he can sign the title over to you. In general, there are two ways to go about completing the sale. Use the method at the seller's lender's office if possible because it ensures that you receive the title right away. Otherwise, you can use the bill of sale method.

Instructions

Lender's Office

1

Agree on a purchase price, and have the seller call the lender to make an appointment to come into the branch office to pay off the loan and complete the sale.

2

Ask the seller what the payoff amount on the loan is. He can get the information from his lender if he does not know offhand. If the payoff amount is less than the purchase price, you will need to bring cash or two separate checks. Make out one for the payoff amount to the lender and the other for the remainder of the purchase price to the seller. If the payoff amount is greater than the purchase price, make sure the seller is planning to bring the rest of the payoff amount.

3

Take the cash or checks to the branch office with the seller at the scheduled time.

4

Give the lender the money for the car purchase, and have it applied to pay off the loan. If that money was not enough, the seller must pay the remainder of the loan at this time.

5

Give the lender your name, address and other information that needs to go on the car title. The lender will fill out the paperwork to have the title transferred into your name.

Bill of Sale

6

Complete a bill of sale that lists the vehicle identification number (VIN), vehicle description, odometer reading and purchase price. Both you and the seller need to print your names and addresses and sign the bill of sale. If the car is expensive, you might want to have it notarized as well to protect yourself from potential fraud.

7

Give the seller the money in the agreed form, whether it is cash, a check or a money order. The seller will give this money to the lender to pay off the loan and release the title. Also, make sure the seller has your name and address to give the lender to put on the title.

8

Take the bill of sale to the Department of Motor Vehicles in your state and get a temporary operating permit to use until your title arrives.