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Selling a Car with Outstanding Financing— Is it Possible?

by | Dec 11, 2020 | Car Finance | 0 comments

Selling a Car with Outstanding Financing— Is it Possible?

You’ve purchased a car and took out a loan to finance it. You have paid off a considerable chunk of the loan.

 

Now, you have been considering the idea of selling the vehicle with outstanding finance.

 

This is quite a common dilemma among car owners who took out financing for the purchase. However, considering how you still have an outstanding balance for the loan, is it really possible for you to get the car sold?

 

Fortunately, the answer to this is YES. However, you need to see to it that you’re doing everything the way you’re supposed to.

 

Below are some of the many important things you need to know about financed car agreement.

 

You can’t just readily sell the car with outstanding finance

If your car has been purchased via financing and there’s still an unpaid balance on the loan, you just cannot go ahead and sell it right then and there.

 

Selling a car that still has an outstanding loan attached to it is considered illegal, especially if you will keep this particular detail hidden from the person who will be buying the car.

 

This does not, however, mean that you’re not allowed to sell the car at all.

 

To do this, you just have to follow the right process involved to sell the car.

 

Ending the finance term

There are a number of steps you need to do first if you are to sell the vehicle. For instance, an important first step is to first get in touch with your lender. Let them know of your intention to sell the car or vehicle so they can provide you with the settlement figures.  

 

A settlement amount is what you need to pay to cover the remaining loan balance of the vehicle. In most cases, this doesn’t just involve the remaining loan balance but also charges like administration fees and of course, early repayment fees and interest, if your finance company charges them.

 

After you have successfully learnt what the total settlement cost is, you can then determine whether the figure or amount is reasonable enough and if you would wish to proceed with selling the car.

 

Note that receiving the settlement figure doesn’t mean you are obliged to accept it. You can choose to turn it down if you feel that it is way too expensive than what you have initially hoped for.

 

Your lender will also provide you with a settlement date. If you decide to go through with settling the loan early to sell the car, see to it that you make the payment with interest before the settlement date your lender has set.

 

If you end up missing the date for the settlement payment, you will have to ask your lender again for another settlement figure and they will also provide you with a different settlement date when you plan to proceed with the selling of your car.

 

Is it worth the trouble to sell?

There’s a possibility that the settlement figure which your lender or finance company will offer is less than what you would have to pay if you are to continue making the loan repayments in the time frame that you have initially agreed to pay the loan off. However, since this is going to be a bulk payment, it might be a bit of a challenge for you to secure the full amount they need in order to settle the loan early. So, whether or not you should go through with it will be dependent on where things stand with you at present financially.

 

You also need to take note of negative equity. This happens when the overall car value is actually less than what you need to cover to pay off what you owe to the lender that financed the car purchase. This is quite a possibility because cars are known for their very quick depreciation rate.

 

This is why it matters that you first ask for a car valuation ahead of time so you will have a figure to compare with the settlement amount that your lender will then provide you with. Then you can draw a conclusion on whether or not it is a good idea to pursue.

 

If the car valuation is less than the settlement figure, then it is a negative equity situation. In this case, it would be more practical to just keep the car for now. Otherwise, you will be on the losing end.

 

Alternatives to consider

It doesn’t hurt to consider other alternatives too.

 

Typically, you will be required to get the amount of the loan paid off first before getting the car sold.

 

However, there may be companies out there who are willing to cover the outstanding balance for the car financing you took out in exchange for a deal of buying the vehicle from you.

 

Here are also buyers who would not mind dealing directly with the lender that provided you with the financing so they can get the loan balance settled. This is quite rare though and in most cases, you will have to work on settling the debt on your own.

 

To sell a car with an outstanding loan balance

Selling a car that still has an outstanding loan balance attached to it is more than possible.

 

It may not be as easy and straightforward as selling a vehicle that is already under your name, but it is doable. All you have to do is follow the right steps and to do it the right way. Also, you should never attempt to sell the car without letting the buyer know that there is still an outstanding loan balance attached to it.