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There are a variety of reasons you may be considering selling your car, and depending on the timing, it’s possible that you still have an outstanding auto loan. Many fall for the misconception that they are unable to sell their vehicle until the loan is entirely paid off despite the fact it isn’t true. While it’s accurate that there are certain difficulties present when trying to sell a car that has an outstanding auto loan, it is far from impossible.
Read on to learn everything you need to know in order to complete the sale of your vehicle despite the outstanding loan.
The first step in trying to sell your vehicle while there is still an outstanding car loan is developing an understanding of your payoff amount. First, you need to look at whether you have negative or positive equity in your vehicle. Negative equity is when you owe more on the loan than your vehicle is actually worth, whereas positive equity is when you owe less than the value of the car. Having positive equity tends to mean that you have a lower loan payoff amount, as you won’t need to pay the difference to the bank when you are upside down on your loan.
Once you understand where you stand with your equity, reach out to your lender to get an official value from them on what the loan payoff amount may look like. By doing your preliminary research, you can be sure that your lender is setting the payoff amount accurately based on the loan balance, and you can also be sure that you can afford the value.
Even if you are certain you can afford the payoff amount for your loan, you can’t just initiate the sales process of your vehicle. It’s important to contact your lender as soon as possible to inform them of your intention to sell. Every lender will have different steps for paying off the loan, whether it’s a standard auto loan, personal loan, or a different type. Additionally, selling the vehicle to someone else will require transferring the car title over to them, which involves many steps as well. On top of all of this, there will almost certainly be fees of some sort involved with the transaction and, potentially, penalties for early repayment of your loan.
Be aware that lenders may try to convince you not to sell your vehicle by emphasizing the downsides of the process. This is simply because going through the event causes difficulties for the dealership, so they may take this stance out of convenience. Don’t be afraid to push back and stand up for your viewpoint of wanting to sell the vehicle, especially if it is allowed by your lender.
Compare the two main options for selling a financed car: private sales and dealership trade-ins. Highlight the pros and cons of each method, including potential differences in financial outcomes and convenience.
Once you have contacted your lender and informed them of your intention to sell the vehicle, as well as gathered all necessary information, it’s time to actually start the process. There are two general paths when it comes to selling a vehicle: private sales and dealership trade-ins. Private sales occur when you sell your vehicle to a third party, whether that be to a person or a private party. Dealership trade-ins, on the other hand, occur when you sell your vehicle back to the dealership directly for cash or credit.
One benefit of choosing to sell your vehicle back to a dealership is that you can oftentimes put in your vehicle identification number (VIN) on the website and receive an instant cash offer. The dealership will also often handle the paperwork for the transaction on your behalf, which makes the entire sales process quicker and easier. They also work directly with lenders most of the time in order to pay off the value of the loan if you have positive equity.
On the other hand, there are certain benefits to private sales. You typically have more negotiation power during a private car sale, which means you can potentially get above market value. However, you and the private party will be responsible for handling all of the paperwork and legal documents involved in the sale. It’s usually worth considering reaching out to your lender to ask them to oversee the transaction to ensure everything that occurs abides by the terms of the payoff of your existing loan.
Regardless of whether you choose to sell your vehicle privately or via a dealership, understanding the steps involved is important. Starting with private sales, take advantage of the following roadmap:
Remember that when you are working with a private party, you will need to handle all the due diligence for the transaction. This means you should run their credit score to check for good credit, inspect finances, and ensure that everything is buttoned up with the transaction.
For those looking into how to sell a car with a loan to a dealership via trade-in, the steps will look a little different. Follow the below in order to complete the sale:
Try to remember that when you’re working with a dealership, you will have less negotiation power than when working with private parties. This means that you may actually need to visit more than one dealership in order to find the best offer for your vehicle. Unfortunately, this can be a point of issue for certain sellers as it can draw the sales process out, but the benefits of using a dealership often outweigh private selling for others.
While the process for selling your vehicle with an outstanding loan to either private parties or a dealership is relatively simple, there are actions you can take to expedite the process and ensure a smooth transaction. Have as much information as possible ready to go, including the appraised trade-in value, documentation for the vehicle you’re trying to sell, anything in writing from the lender about the sales process, and other information.
During the buying process, be as transparent as possible with the prospective buyers and include all relevant information for your vehicle. It’s also worth getting any proof that shows accidents the vehicle has been involved in or maintenance records that show the vehicle has been taken care of properly. At the end of the sales process, don’t forget to reach out to the lender to ensure that they received the total requested payoff amount for the vehicle, as the last thing you need is for the process to get stalled due to this.
One easy way to quickly increase the value of your vehicle to make it more attractive to buyers is to consider investing in an extended warranty contract. For those unfamiliar with it, an extended warranty or vehicle service contract (VSC) offers financial protection for mechanical issues with your vehicle by reimbursing you for covered repairs. While this may sound similar to car insurance, it is distinct in the sense that extended warranties cannot be used for repairs stemming from car accidents, natural disasters, or other similar events covered by insurance.
Certain extended warranty contracts even offer reimbursements for preventative maintenance services such as oil changes, tire rotations or alignments, and much more. To add perspective to the benefits of extended warranty contracts, Endurance Warranty is a provider with many vehicle service contracts from which to choose. Our most comprehensive package, Endurance Supreme, offers near bumper-to-bumper coverage for everything from the engine to smaller parts such as gaskets and hoses.
While the upfront cost of an extended warranty can certainly cause a person to balk, the long-term benefits are unrivaled. This contract can be used as a negotiation point for pricing when looking at the value of your car, even if sites like Kelley Blue Book (KBB) or Edmunds value your vehicle lower. Before taking this step of adding an extended warranty to your vehicle, be certain that the extended warranty you choose is transferable to a new vehicle to help your valuation. The last thing you need as a borrower with monthly payments on your vehicle is to discover that you can’t actually complete the transaction.
Regardless of whether or not you’re planning on selling your vehicle, having an extended warranty contract tied to it offers many benefits. A vehicle service contract through Endurance can provide you with unrivaled benefits and protection for key parts under the hood, including your engine, transmission, radiator, air conditioning system, and much more. With a myriad of contracts to choose from, prospective extended warranty customers can truly design a package that suits their unique needs.
In addition, all Endurance customers can activate extra Elite Benefits, which provides perks such as reimbursements for up to four tires due to road hazards, up to $1,000 in total loss protection, roadside assistance, and so much more.* To learn more about how Endurance can help protect your vehicle, call our plan advisors at (800) 253-8203 to request a FREE quote. Alternatively, feel free to shop online to see your price right away.
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By clicking the button, you consent to Endurance using automated technology to call, email, and text you using the contact info above, including your wireless number, if provided, regarding auto protection or, in California, mechanical breakdown insurance. You also agree to the Endurance Privacy Policy and Terms and Conditions. Consent is not a condition of purchase, and you can withdraw consent at any time. Message and data rates may apply.
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With over three decades of professional experience in the automotive industry, Dario brings a wealth of knowledge and expertise to the Endurance team. He hails from Argentina, where he received his technical trade education and pursued mechanical engineering. Read more about Dario.