How to Trade in a Vehicle If It Is On a Loan & You Don't Have the Title

Many states are "title-holding" states, meaning the state motor vehicle office sends the title to the lien holder instead of to the registered driver. The bank holds the title until the loan is paid in full. In the event you trade your car to a dealer, he must pay off your old loan to obtain the title of the vehicle. State paperwork varies for the procedure of receiving a title, but your dealer will ask you to sign paperwork authorizing him to sign it on your behalf or at least get the title delivered to the dealership.

Instructions

1

Call your lender to determine your loan's payoff amount. Work with a dealer who has a car you want and allow a dealer representative to appraise your car for a trade value. Let your salesperson know that you have a loan on your car.

2

Give your salesperson your loan account information so she can call to get the payoff amount from the bank. Offer your account number if you have it, or your Social Security number, which the bank uses to review your account information. Ensure the buyout amount the bank gives to the salesperson matches the amount the bank gave to you.

3

Go over the new car's financing and pricing. The salesperson will subtract the trade value from the purchase price of the new vehicle, add on taxes and fees, then add your payoff amount to the total to figure your purchase price. Provide your dealer with your current registration (which proves your ownership) and arrange to pick up the new car.

4

Sign your vehicle loan and motor vehicle paperwork with the dealer. Because you have to release ownership of the trade-in vehicle, you may have to sign a Power of Attorney form, which allows the dealer to obtain the title and sign it on your behalf. Ask any questions if you are unsure of the process.

5

Sign the dealer form that authorizes him to pay off the loan on your behalf, as the Power of Attorney procedures may not be used in your state. In this case, the dealer will pay off the loan and receive the title, but you must go back in to the dealership to sign over the title when it arrives.

6

Go back to the dealership to sign your title. Your dealer will call you when it arrives. The amount of time for title processing and mailing varies by state, so ask your dealer when it should arrive, if you want to know.