How Do I Sell A Car Privately If I Still Owe Money On The Loan?

Illustration for article titled How Do I Sell A Car Privately If I Still Owe Money On The Loan?

You will typically get more for your car by selling privately, rather than to a dealer, but that transaction can get complicated if you still have a balance on your loan. With a little preparation and clear communication with the buyer, you can navigate these extra steps successfully.


Welcome back to Ask Automatch, where you get to ask me your burning car buying questions. Got a scenario or a situation and you aren’t sure what to do? Send an email to and I’ll try to help you out.

This week’s letter comes from reader Daniel, who is doing his best to be financially responsible but isn’t real clear on how to sell his truck to a buyer when he hasn’t paid his loan off.

I’m recently married and picked up several thousand dollars of school debt through the marriage. I drive a truck on which I still owe about $6,200. In order to slim down our joint budget and save some money every month (truck payment and full-coverage insurance), I am looking into selling the truck and buying a beater car or pickup for my short commute.

I can get a decent price on the truck which would easily cover the lien payoff and leave several thousand in my pocket. If someone decides to purchase my truck, how does that work in the following two scenarios: a) they have the cash to pay for it outright, or b) they want to get a loan for it?

We have covered this topic a little bit before, but it is worth revisiting since there may be some more obstacles to contend with other than just finding a buyer who is willing to work with you.

So the first thing I would suggest is to take the truck to a dealership like CarMax and get them to make you an offer. Dealers buy vehicles all the time with loan balances so your transaction should be pretty easy. However, their offer will probably be a bit less than what you get in the private market.

The reason you should at least get an offer from a dealer is so you have a baseline for negotiating with private sellers. When you list your car and truck for sale online, you will inevitably get a bunch of low ball offers that aren’t worth your time. That dealer offer will tell you where your threshold is. If, after a few weeks, no one exceeds that dealer number by a significant amount, just sell it to the dealership.

Since trucks are always an in-demand vehicle, chances are you will get a decent offer from a private buyer. In the initial stages of communication with the buyer, you will want to be clear that you do not have the title in hand and there is a loan balance. Some buyers are willing to work through this for the right car and some aren’t. It’s best to give someone an out right away so your time isn’t wasted.


If you found a buyer willing to give you a good price and manage the process of your loan balance, the next step is to communicate with your lender to see what their process is. Every bank will handle this a little differently, and depending on how the buyer intends to pay for your truck the options will vary on how to close the deal.

If your lender has a physical location nearby, this makes things simple. Just request that your local branch get a copy of the title and conduct the transaction there. The buyer gives the bank the payoff amount, you get the balance and they get the title.


More often than not your title is held by a lender without a physical location nearby. This is going to make things a bit more difficult, but not impossible.

Now, what to do if the buyer needs a loan themselves? Then it’s possible that their bank can facilitate the transaction between both parties and your lender. Have the buyer communicate with their lender to see if there is a process in place for this.


If the buyer’s lender cannot assist with the transaction or they are paying cash, there is going to be a delay as to when the funds clear the bank and the title is released. Obviously, both parties want to be sure their interests are protected. In this case, you may want to consider using an escrow service. Escrow is basically a third party that holds the funds and ensures that both parties get the necessary parts they need.

It would work like this: once the buyer agrees to a price, that amount is deposited into an escrow account. You would then get a lien release and whatever necessary paperwork from your lender to give to the buyer. The buyer then notifies the escrow account that they are in possession of the vehicle and the funds are released to you.


The escrow method presents two issues, the first is that the escrow company will charge you a fee which is often a percentage of the sale. Often the buyer and seller will split this charge. The second problem is that these tend to come with a lot of scams, not with escrow accounts themselves, but fraudulent sellers utilizing escrow accounts to sell cars that don’t actually exist. For this reason, some buyers may be hesitant to agree to the escrow account. (Although if the buyer and seller have met in person and the buyer knows that the vehicle for sale actually exists, that should mitigate any fear about using the escrow service to secure the sale.)

If you don’t want to bother with the escrow and you think it may take some time to sell your truck, you could try to refinance your loan with a local lender who would then hold the title. The interest rate wouldn’t matter all that much since you would not be keeping the vehicle for very long, but having a local bank help close the deal would make your life much easier.

Tom is a contributing writer for Jalopnik and runs He saves people money and takes the hassle out of buying or leasing a car. (


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Lol, whatever you do, don’t take it to a dealership like car max and get smoked for thousands when you can just detail the car and sell it on craigslist in mere days, why waste time getting a baseline when you can just look at what others are selling for on craigslist or ebay anyways?. I flip 3-4 cars per year and often have loans on them, it’s never and issue. This right here is all you need to know:

“there is going to be a delay as to when the funds clear the bank and the title is released....

... once the buyer agrees to a price, that amount is deposited into YOUR account. You would then get a lien release (usually on the spot from your lender) ....

You can use escrow if you want, I never have once, and no one has ever complained. If you use a bank wire, cash or bank check, your lender should accept and give you the lean release immediately. Just check before.