Can I Sell a Financed Car?

First of all, yes – you can privately sell a car that is still financed. You can sell it yourself or trade it in at a dealer but you’ll get more for the vehicle when you sell it yourself (that’s sort of the point of this whole website – helping you sell your car quickly and get the most for it by doing it yourself).

The main thing you need to know is that you have to call your bank (or wherever it’s financed) and ask for the payoff amount. This is the amount you would have to pay in order to get rid of the loan and have the car just in your name.

Along with that, you’ll need to notify anyone coming to see the vehicle that the title is not clear and that there’s still a loan on the car. Be sure to tell them that you know the payoff amount. They’ll ask what that is and it’s fine to tell them. It just can’t be for more than you’re asking – you’d essentially be “underwater” with your vehicle loan-wise if this is the case.

Underwater With a Car Loan

Being underwater with your car loan means you owe more on the car than it’s worth. This is a problem if you want to sell the car. Your best option here is to wait or find the money to pay down the loan more so that you’re not underwater with it. You should ask yourself if you really need to get a different car or if you can wait.

I was in this situation once – I traded in a car that I owed money on and got a new car. The dealer and bank then rolled what I owed on the old car into the new loan. I look back and don’t know why they did that. It seems that today, banks would be less likely to do that.

One option is to try to sell the car, get the most you can for it and then take out a personal loan or home equity loan to cover the difference. You might even be able to take a loan out on your 401k or retirement plan but that’s not a good idea and it should be avoided if possible.

One more option might be to get a different loan on the vehicle if you have good credit. Maybe you can get a lower interest rate or extend the payments over another year or so and then you’d have a lower monthly payment. Often, these loans don’t take effect for 45 days, so you’d also be able to skip a payment, which might also help you.

Selling Your Car That You Own On

Let’s go through the complete process on how to sell a car that is not paid off so that you do it right and don’t run into problems. Know that you’ll have to do a little bit of extra work but if you really want to sell the car, you probably can. One important thing is to make sure potential buyers that come by to look at the car feel comfortable. If they ask you what you owe or what the payoff is and you don’t even know, they’ll probably leave.

1. Call your lender and find out what the payoff is. They’ll tell you how long that amount is good for. It might be a week or 15 days or 30 days.
2. Find out how much your car is worth and then price it properly.
3. Clean your vehicle and get it ready to sell. Take good pictures, write up good ads and get the word out (online and offline).
4. Make sure you have all the necessary paperwork ready for when people show up. You’ll need the title (with the lien note on it), a bill of sale document and any other paperwork that the Department of Motor Vehicles (DMV) in your state requires (smog test, etc.).

What to do When the Sale Happens

When you have agreed on a price with a buyer, you’ll need to get the title in their name. To do that, you will first have to go to your lender (bank) with your check or cash from the buyer and then have the loan paid off. The complicated thing here is that if you have a personal check, the bank might want to wait for the check to clear and this will delay things. If possible, get cash or a bank check. The bank check can be made out to you or your bank.

Your lender might be able to give you a lien release right then or it might take a few days. When you get it, you’ll need to go to your state’s Department of Motor Vehicles and get a clean title that does not show a lien on the vehicle. Once you have that, you can sign the vehicle’s title over to the new owner, like normal.

The buyer might want to go to the bank with you. If this is the case, then that’s fine. Plan a time where you can both do it together. Maybe call your bank ahead of time and ask what the best time is to do that and who you should talk to – just to ensure that everything goes smoothly. If you get in there during their busiest time, you’ll have to wait and let’s face it, that’s just awkward being there with someone you don’t know.

What Not to Do

Probably the worst thing you can do is not tell the buyer that the vehicle isn’t paid off. If you take their money and then tell them that you have to first go to your bank, they might not be happy. Be honest and tell them.

More Tips

If you want more tips and advice, I have another article here on this website that you should read:

How to Sell a Car Privately When it is Financed

Conclusion

Know that it is possible to sell a vehicle that is not paid off. It’s more work but it can be done. Your best bet is to find a way to first pay it off so that you don’t have to deal with all this extra work. You’ll also attract more buyers when the car title is clear as they know they won’t have to also work a little more to get the vehicle – it’s just a lot cleaner and easier this way.

Do everything you can to make the sale hassle free. Think of what questions someone might ask about the loan and have answers ready. Get the payoff and talk to your bank and see if they’ll work with you on your loan – just let them know what situation you’re in and they might even have some ideas that you haven’t thought of.

Thanks for stopping by the website and reading this article. If you have comments that might help someone, please leave them below. Please do share this article with others you know if you think this article is valuable and would help them.

You really can’t go wrong having one as it protects both you and the buyer. They will need it to prove that they now own the vehicle and since that’s important to them, you should provide it. It also protects you as the selling because the buyer states that they paid you for the vehicle.

Note: If you want to make sure that the Bill of Sale document you find is legal, then you should really contact a lawyer. The owner of this website does not claim to be a lawyer and it is your responsibility to make sure you follow the correct laws in your state to complete the sale of an automobile.

Download a Bill of Sale Document

Bill of Sale Template

There are places to get a Bill of Sale document online. Some state DMVs offer Bill of Sale documents on their websites, so that’s a good first place to check. Use the links above to find your DMV’s information about bill of sale documents.

Here is one place you can find Bill of Sale documents for each state:

http://www.dmv.org/bill-of-sale.php

Please note: The link above is not a government website – even though it kind of looks like one.

Here’s the Bill of Sale document I use (bill of sale Word doc):

• http://www.cartips.com/wp-content/uploads/Bill-of-Sale.doc (24 kb Word doc)
• http://www.cartips.com/wp-content/uploads/Bill-of-Sale.pdf (26 kb PDF file)

Note: If you want to make sure that the Bill of Sale document you find is legal, then you should really contact a lawyer. The owner of this website does not claim to be a lawyer and it is your responsibility to make sure you follow the correct laws in your state to complete the sale of an automobile.

What Should a Bill of Sale Document Say?

There are a number of things the bill of sale should say. They include:

• Seller’s name
• Buyer’s name
• VIN of the vehicle
• Vehicle year, make and model
• Odometer reading / disclosure
• Sale amount
• Date of the sale

Check Your State’s DMV

Here is the list of the Department of Motor Vehicles for every state in the United States – pick your state:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• Washington, D.C.
• West Virginia
• Wisconsin
• Wyoming

Along With the Bill of Sale Document, What Else is Needed?

Payment
First, make sure you get cash or payment.

Title
Second, sign the title over to them. Record the odometer mileage. This protects you as the seller because if the new owner gets in an accident on the way home, you’ve shown when the vehicle was sold and it protects you / limits your liability.

You may opt to have a release of liability document for them to sign as well. It just states that you’re no longer responsible for the vehicle. You can include a line like this in the Bill of Sale document if you want.

Plates
Third, remove your plates/tags from the vehicle. I had someone once say that they wanted them on the car and they’d send them back to me but I declined. The license plates are your property. Don’t include them.

Maintenance Receipts
Fourth, hand over any maintenance records if you have them and want to give them to the buyer. You may choose to not do this as it’s one way where you can be a victim of identity theft. Yes, your address, signature and even partial credit card information is probably on those receipts. Either cut those parts out or cover over them with a marker if you hand them over.

Check the Car Over
Fifth, make sure all your property has been removed from the vehicle.

Keys
Sixth, hand over the keys – both/all sets.

Cancel Insurance
Finally, go cancel the insurance on the vehicle. Store the Bill of Sale document somewhere you know where it is in case you need to find it.

Smog Test
Your state’s DMV might require you get a smog test or there might be other requirements. Make sure you look up their website and find out all that you need to do. Make sure the registration for the car is up to date or you might owe money to the state.

Conclusion

It is in your best interest to have both you and the buyer sign a Bill of Sale document when selling your car. It protects the buyer, too. They will appreciate you having one ready. They may also bring one. In that case, look them both over and decide either to just sign one set or sign both sets of documents.

Make sure you see the buyer’s driver’s license so that you know it’s them. Make sure their signature matches, too. Don’t worry about offending them – this is a business deal. You’re not going to be best friends or anything. You most likely won’t ever see this person again in your life. It’s important to protect yourself, so don’t be afraid to ask for ID or ask them anything else. Treat the buyer right and obey the law.

I hope this article helped you understand what’s needed in a bill of sale document for selling a car. If you have questions or even comments, please leave them below. Please also share this article so that others know about it.

Tips for Selling a Car Yourself

You really do need to protect yourself when selling a car. Most of us are not used car salespeople. We don’t put a car up for sale everyday or even every other year. The thought of trying to sell a car yourself can seem a little scary. You’re selling a valuable possession to a complete stranger, right? Are they a crook and do they know tricks that you don’t know about?

There are some pretty complex fraud schemes out there. In general, go with your gut – if something doesn’t feel right, then pass on the deal… another buyer will be by soon. It’s better to wait than get scammed.

Here are some tips and precautions to help you protect yourself when you sell a car privately.

Secure Payment

Always secure payment before you transfer ownership of the vehicle when you sell your own car. This means get their money before you sign the car over to them. Never sign your car’s title to someone in advance and never before you have payment.

Accepting Cash / No Funny Money

Cash is king! This is the best way to accept payment for a used car. Make sure it’s real cash, though – here’s a good resource:

How to Detect Counterfeit US Money (www.wikihow.com)

Accepting Checks

If you get a personal check or even a cashier’s check, then verify it with the issuing bank (not your bank… unless it’s the same bank) – the name of the bank on the check. If it’s later at night when banks are closed and they offer you a check, then you have two options. First, see if the bank has a 800 phone number that’s open all night. You might end up at a call center but see if they can help you. Second, simply wait until the next business day. Tell them you’ll hold the car until the morning. Take a photocopy or picture of the check so that you can make that phone call in the morning to the bank.

Here’s a good resource for figuring out if a check is good or not:

FakeChecks.org

The best thing to do if you get a check is go with the buyer to their bank if they are local or if there’s a local branch of their bank near by. If they’re hesitant about it, then something may be up. We’re talking about a lot of money here, so don’t be “Mr. Nice Guy” and just accept it – this is business… handle it like business. It’s your money that you worked hard for.

Cashier’s Checks and Money Orders

Be a little wary about accepting a cashier’s check or money order because there’s no official design or format for one – they come in all shapes and sizes. They can vary greatly from bank to bank. This also means a crafty criminal can come up with a fake bank name and fake checks.

Even if your bank cashes the check, it’ll take a while for the check to clear, so you’re not out of the woods yet – it could still be bad. It may take days or a week or two and even though the bank accepted it, if it didn’t clear, you may be on the hook for the money and be responsible to pay it back. Yes, really.

Escrow Services

An escrow service is where a trusting third party gets involved and takes the money and title and then hands both off once they’ve been verified. There’s usually a small fee for using this service. If you decide to use one, then do some research on it and make sure it’s legit. If you’re not sure, then suggest one that does look legit and see if the buyer accepts those terms.

From KBB.com (Kelly Blue Book):

Remember these tips before you agree to use an escrow service:

• Avoid any payment or escrow service that implies an affiliation or partnership with KBB.com.
• Avoid any escrow service that claims to be operated by TRUSTe. TRUSTe doesn’t operate an escrow service.
• Verify an escrow service’s legitimacy by checking with state regulators.
• Research the escrow service.
• Decline the transaction if the other party insists on using an escrow service that you’re not sure about.
• Use a search engine to open the website in a different browser-don’t click on a link the seller provides.
• Dial the contact number listed.
• Search for the company on the Better Business Bureau website.

See Their Identification

A legit buyer shouldn’t have a problem with you seeing their driver’s license… they’re buying a car, after all. Also see one other form of identification that has their name on it. An insurance card is good because it’ll also have their address on it.

All you’re doing is verifying who they are here. They should have no problem with that. If they do, then be careful and tell them you’re not comfortable with the deal. If they want the car bad enough, showing ID should not be a problem at all. They might even ask to see yours… which is fine. Be prepared to show it.

Common Car Buying Scams

There are some well known scams to watch out for but this by no means is a complete list. Again, if something doesn’t feel right, then back out of the deal and wait for another buyer to come by.

Buying the Car, Sight-Unseen

This is when someone gives you an offer on the car without even seeing it. Most people will want to come by and inspect it and take a look at it. Sure, in today’s electronic world, more and more people are actually buying cars this way but it’s still kind of a red flag. Be especially careful if they send someone else to pick it up.

Overseas Buyers and Overpayment

You may get an email or phone call from someone overseas who needs to buy your car. Maybe they’re a soldier stationed overseas or somebody just out of the country. They may want you to ship the car and say payment is coming soon. They’ll usually pay you full price for the vehicle with no questions asked. It may seem like a deal of a lifetime, too. What often makes things worse is, they’ll pay too much for the car and then ask you to give them change or some money back… this just means their method of payment will bounce and you’ll be out even more money.

Another shady situation is they might have someone else who owes them money make a payment to you. This is definitely fishy and all of a sudden, there’s a lot of drama when all you really want is straight cash from someone who comes by, looks at the car and gives you an offer. Don’t don’t sucked into a complicated deal because that’s a good sign that it’s a scam.

Payment Plans

Someone might not have the money now but they can pay you later. This is not good… you’re not a bank. You don’t have the means to chase them down if they don’t pay you. Stay away from this deal, too.

The Craig’s List Scam

Another little scam I detail is the Craig’s List car buying scam, which is another article here on this website. Be sure to check it out.

The Mechanic Scam

If they want to take the car to a local mechanic to have it checked out, then go with them. Don’t just hold their license, which might not even be real.

The Test Drive and Purchase

Personally, I like to go with them. I let them drive but I’ll be in the passenger seat. This gives me a chance to talk with them more and address any concerns they might have. You can always give someone and their friend or parent or relative some time alone after the test drive to talk it over. Don’t feel like you have to give someone the keys to your car and have them go alone on a test drive. They might even damage the car and then it’s just your word against theirs and you can’t win that battle.

When you test drive with them, you can also give them good directions, too. Like I said, you can answer questions and give them more information while they’re driving it.

Bring your cell phone with you… just in case. You can even have someone follow you in another vehicle if you want (a good idea) – after all, they’re driving you and can go anywhere they want, basically. It’s best to not go at it alone.

Let Them Drive it?

If you do happen to want to let them test drive it alone, then get a copy of their driver’s license (photocopy it with your printer or take a picture of it with a camera or phone). You can even have them leave their set of keys with you – although if your car is of greater value, then this plan doesn’t really hold water.

Deny any strange sounding requests like if they ask you to drive the car to another location or something.

Conduct the Deal / Purchase Outside

It’s important to know where to sell a car. There’s no need to let someone you don’t know into your home. This isn’t a friend of yours or anything. Take care of business outside, on the curb. Someone planning to rob homes might not want to buy a car but just get a look in your house to see what you have and what the easiest way to get in is. They might just be casing your place to rob it later when you’re not home. It’s possible.

You should just take your residence out of the equation and conduct the deal at a local park or shopping mall or a public place like that. It’s up to you and your comfort level.

Don’t Give Away Your Keys

Don’t ever give people your car keys – you should hold on to them yourself until the deal is done and you’ve accepted payment. There are scams where people can copy your keys, so you need to hold on to them. Also, people might make the mistake of leaving a house key on their key chain or other keys and they can also be copied.

Watch for Identity Theft, Too!

If you decide to give the new buyer receipts for work you had done on the car, you might even want to blot out or cut out your address and/or signature on all those receipts to help protect yourself against identity theft.

Sign the Title Properly

Make sure you complete all the necessary paperwork to transfer ownership of the vehicle (after you have secured payment, of course). Know what is required in your state. If necessary, contact your state’s Department of Motor Vehicles and ask them what to do.

Sometimes the buyer may want you to put a lower selling price on the title so that the buyer pays less tax. I always put down the real price because that’s my signature next to it, so I’m responsible for that information. What’s fair is fair and what the law is, the law is.

Have Your Own Bill of Sale Document

I like to have them sign my own bill of sale document to explain that I don’t offer a warranty of any kind and I disclose what I’m selling them and for how much. We both print our names on it and sign one for each other. You can find automobile bill of sale documents online or I have one that I use which you can download but I’m not an attorney and you use this at your own risk.

Shake on It!

I don’t know, there’s just something about a handshake that concludes a deal and shows trust. Call me old fashioned, I guess, but I like a good, firm handshake when we reach a deal.

Conclusion

Just use your head! Use your gut, too. Be smart and be prepared for anything when you sell your own car. With most deals, there’s usually no problem at all but you never know. You don’t want to be that one person who got scammed or even hurt.

After all your work of marketing a car and getting a buyer to your door, you don’t want to see the whole deal crash down or lose a good chunk of money.

Be smart, follow these tips and you’ll be able to protect yourself when you sell a car.