Can You Privately Sell a Vehicle That You Still Owe Money On?

When it comes to selling a vehicle, we don’t typically have a ton of options. The easiest thing for most owners who still owe money on their vehicle, where the bank holds a lien, is to travel to a dealership to make a trade-in where more experienced sales teams know exactly what to do. There are pros and cons to this, as well as pros and cons to selling your vehicle privately through social media platforms and online, especially if you have an active auto loan on the car. But, just because you don’t hold the title in your hand doesn’t mean you’re options are completely limited, as most banks and loan organizations do have ways that allow you to sell a used car that you still owe money on in a private sale.

Private sale versus trading in at the dealership

Used car being privately sold by owner
A used car being privately sold by owner | Michael Siluk, Education Images, Universal Images Group, Getty Images

There are a lot of reasons why vehicle owners may choose to privately sell a vehicle instead of trading in at a vehicle, and they usually have to do with money. While it can be less complicated and confusing to trade a vehicle in at a dealership, the dealership themselves have some overhead fees that they must consider when buying any used vehicle, so you will typically be offered less money than you could get from privately selling. Of course, privately selling comes with some drawbacks, which means it isn’t always worth the headache to some buyers, and in the current market, you may actually be looking at a dealership offer that is worth as much as you would get privately selling, anyways.

Can you privately sell a vehicle with a lien?

Used vehicle for sale
Used vehicle for sale | Justin Sullivan, Getty Images

Most vehicles on the market that are only a few years old tend to still have a bank lien on them, meaning the bank holds the title until the vehicle is paid off. That doesn’t mean you aren’t incapable of privately selling your vehicle to another person, it just means there are a few more hoops that need to be jumped through in this case, which isn’t always a bad thing if you are able to sell the car for a decent price. Keep in mind, your bank will not give you the title to sell the vehicle without completing a full payment, so the price at which you are selling your vehicle must at least be the remaining balance on your auto loan — unless you want to pay out of your own pocket to get rid of the vehicle. The best option is to contact the bank holding your vehicle lien and discuss selling options with them, as they may suggest that you come into the bank office with the buyer to complete the transaction.

Things to keep in mind when privately selling a vehicle

There are several things to keep in mind when privately selling a vehicle, especially if that vehicle is still under a bank lien. Under no conditions will you be able to get the vehicle’s title to transfer it during a private sale until the loan has been fulfilled, either by yourself or the buyer. It isn’t reasonable or suggested that a buyer make a payment for a vehicle before the title is presented, as it can take several days for the title to be released from the lien holder, and you should never let someone take delivery of your vehicle without the title transfer is complete. Every auto loan and bank works a bit differently has may have different protocols for this procedure, so the only way to know the correct steps is to contact your bank or lienholder directly prior to listing the vehicle for sale.

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