Car Loan Guidance

How can I sell my car before my car loan ends?

April 05, 2022 • 3815 views

The process involved in selling a financed car is not complicated, it is simple but time-consuming. When the car is financed, three parties will be part of the deal – you (the owner), the buyer, and the bank that gave you the loan.

It’s very important to know your car’s value, payoff amount, etc. In addition, maintaining an open dialogue with the lender can help, allowing you to explore all your options. Each lender has its own rules and regulations when it comes to selling a car with a loan, and you must follow them so that there are no problems later.

What steps should I take to sell my car before my loan ends?

It's a good idea to check with your lender to find out how much you owe. To make it official, you need to get a payoff letter from your lender. Here are the steps which you should take care of:

Determine the "payoff" amount.

This is the amount you will have to pay to close the loan on the car before transferring the title. To get this number you must contact your lender directly to ask how much you owe. Generally, the payment includes any due interest, fees, and potential prepayment penalties that the lender may charge.

If your car’s worth is more than the payoff, the number will be positive, which means you will walk away from the sale with some money in your pocket.

If your car is worth less than the payoff amount, you may have to fill that gap by paying money from your pocket.

Reach out to your loan provider

Once you have decided that you want to sell your car, you should first contact your loan provider and let them know that you plan to sell. You can then discuss what options you have for clearing the dues. Be sure to inquire about early repayment and exit charges.

The sales process can vary with each lender, so find out what your lender's process is. If the lender is a bank or a credit union, they can direct you to bring in a buyer and they will take care of the rest. The buyer may be required to pay directly to the lender.

So, it is suggested that you involve the lender in the sale process, as they own the vehicle since you haven’t yet fully repaid the loan. Their participation will also make the whole process genuine and assure the buyer that there is nothing fishy or suspicious about the deal. You can ask the lender for the best possible way to pay off the loan amount and transfer the ownership to the new buyer. Most lenders already have procedures in place to resolve these types of situations and they can recommend you the best way to get out of the situation quickly. You can also negotiate for a reduction or waiver of additional charges that the lender would otherwise levy for prepayment.

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Mode of Payment

Accepting large payments in cash is not recommended. You should insist on getting the full payment in your bank account. Banks prefer to receive payment in the form of a check or demand draft. Wait for your bank to confirm the receipt of payment and only then proceed with the sale process. Once you receive the money, pay off the outstanding loan and get the title transfer in the new buyer’s name.

Know how much your car is worth

Determine the value of your car using a vehicle valuation site and put all the key information of your car - its year, model, overall condition, and the Pin code you live in.

Complete the transaction

If you are planning to use the money that you get from the sale of the car to pay off the loan, you should be able to do it in one go all at once at the bank from which your loan is taken

Keep in mind, if you sold the car for less than the amount owed on the loan, you will be liable to pay up the difference before the transaction is completed. On the other hand, if you sold the car for more, you should get extra after covering the outstanding amount.


Remember that selling a car with outstanding debt can take time. Calculate and factor in the time it will take to complete the process. You can calculate the outstanding loan amount and other additional charges on loan closure by using the car loan calculator.

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