You must follow your bank's and state's procedures for selling a car with a lien holder. Expect to satisfy your loan before the lien holder releases its portion of ownership. In some states, the lien holder also holds the car's title until the loan is satisfied, so it may take several weeks before you can transfer the title to the new owner.
The Payoff Process
You can use the money you get from the car sale to pay off your loan balance. But if you owe more than your car's selling price, you'll have to pay the remaining loan balance yourself before your bank releases the car's title or lien release. If you borrowed from a local bank, ask if you can pay off your loan and obtain the car's lien release or title the same day. If the bank isn't local, plan ahead by obtaining the payoff instruction and determine how long it takes to retrieve your title transfer paperwork.
Determining Value
Before you sell your car, find out if you'll have to provide extra money to pay off the car's loan. Check the resale value of your car by using appraisal websites. Edmunds.com or the Kelley Blue Book website offer private sale values based on vehicle condition and mileage. Check local classified advertisements to determine the market conditions in your area. Some market conditions, such as season or gas prices, affect car values. Price your car properly to make your sale. Subtract your payoff amount from your vehicle's resale value and arrange your funds before selling the car. You can keep any profit you make from the sale if you owe less than the vehicle's resale value.
Your State's Title Transfer Rules
Some states don't require lien releases to transfer vehicle titles. Buyers, however, usually know enough about the risks of purchasing a vehicle with a lien to avoid the purchase if you can't provide proof of your loan payoff. Selling the vehicle doesn't excuse you from paying the loan, and the vehicle can be repossessed from the new owner if you stop making payments. Otherwise, most states require proof of a satisfied lien. Depending on your state, this might include the lien holder's signature on the title, a lien release or a new title in your name only.
Completing the Sale
If you can't immediately obtain your title transfer paperwork because of your lien holder's payoff and paperwork procedures, let the seller know when you expect to receive the paperwork and complete the sale. To reassure the buyer, sign a bill of sale stating your intention to sell the vehicle and that you'll transfer ownership the day you receive your paperwork. If your buyer is financing the purchase, ask him to consider financing with your lender. This way, the ownership transfer process is quickly handled by the bank.
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