How to Sell My Car When I Still Owe Money on It

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You may have a desire to sell your car, but still have an existing loan you need to pay off. If your car's value exceeds your loan balance, you shouldn't have any problem selling the car and paying off the loan,

However, if your loan balance exceeds the market value of your car, you'll find yourself in the unfortunate position of being upside down on the loan.

This can happen when you buy a car new because it depreciates thousands of dollars as soon as you drive it off of the lot—and continues to depreciate quickly for the first few years of use. It can also happen when you trade in a car and the loan that you have on it is rolled over and folded into a new loan to purchase a car—creating a new loan balance that's higher than the value of the car you just bought.


Sell the Car Yourself

Selling the car yourself can help you break the cycle of owing too much on your car. It does take some work, but it can save you a lot of money on interest and you may get a higher price for the car. Here's how to proceed:

  1. Determine how much you can get for your car first. Start with a reputable information source such as the Kelley Blue Book. Look at the private seller amount, since you may get the most for your car by selling to a private party. As you look over the criteria, be honest about the condition and value of your car. This will help you determine the real selling price. And, you may choose to list the vehicle at a price that's a few hundred dollars over your asking price so you can be haggled down.
  2. Determine how much you owe on your existing loan. If you're underwater on your loan, subtract your selling price from your loan amount. You'll need to come up with the remaining dollar amount in order to pay off your loan and sell the car. Contact your bank or financing company, and let them know you'll be selling your car. Ask how you can get the title from them when you do sell. Banks and other lenders often keep the titles in a centralized location, and it may take a few days to receive the car's title paperwork.
  3. Next, figure out how to come up with the difference between the loan amount and the amount for which you expect to sell your car. If you don't want to dip into savings, you'll need to take out a loan. Talk to credit unions or banks in your area to see if you qualify for an unsecured loan. While it may seem like you are borrowing money to get out of debt, you have already reduced the amount you owed by selling the car—and you'll be able to pay off this smaller loan much quicker.
  4. Put your car on the market. You can use online resources, such as eBay, Craigslist, or Autotrader. You can also list the car in your local classifieds or appropriate locations around your neighborhood, including your local gas station. If you don't get any responses, you probably priced the car too high, and you should consider lowering the price.

Roll Your Car Loan Over

You always have the option of rolling your old loan into a new car loan and trading in your current car. Although this option will make your financial position even worse, you will at least have the benefit of a new car that will hopefully retain more of its value.

Talk to your dealer about financing with them. Most banks will not finance a new car loan for you if they need to loan you more than 100 percent of the value of your new car. Once you have your new car and loan, you can always refinance with a bank after paying the loan down to an amount that comes out to less than your car's market value.

Refinance Your Car Loan

You can try refinancing your existing car loan so that you have a lower interest rate and smaller payments. If you want to pay it off more quickly, you can shorten the term on the loan, or you could just increase the amount you are currently paying on your own to pay the loan off faster. You can also lower your car payment by stretching out the refinanced loan for additional years, but you'll also pay more in interest. And, if you have missed payments, you may not qualify for a car loan.

4 More Tips

  • Once you find a buyer, go to your car lender with the money. You should have your loan amount, as well as the money from the buyer—only accept cashier checks, money orders or cash. Your lender will fill out the paperwork to transfer the title to the new owner.
  • If you need to buy a car to replace the one you are upside down on, find an older car in good condition that only costs you a few thousand dollars. You should be able to find a reliable car in this price range. You can drive this car for a year or two until you get out of debt. This option makes sense because you may not qualify for a car loan if your credit is bad.
  • Make it a goal to pay cash for your next car. This is one of the most important things you can do to build financial security and reduce monthly payments necessary to pay down debt.