This is a very common question with car buyers and owners.

The answer is yes, you can sell the car, but you must get enough money in the sale to pay off your loan, so that your bank can give you a “clear” title to give to the new buyer. This is where problems often arise. Let’s see how.

If you are upside down

If you are still paying on your loan, you still have an outstanding balance, which might be more than your car is actually worth. This means you are “upside down” and would need additional cash, after the sale, to fully pay off your loan. Loan companies want to be paid in full immediately after the sale. They won’t allow you to continue to make payments on a car you no longer have.

If you are not upside down

If your loan balance is less than the outstanding balance on your loan, then there’s no problem. You get the money from the buyer, use part of the money to pay off your loan and get the title, and put the remainder of the money in your pocket — possibly as part of a down payment on another car.

 How does it work?

Generally, a smart buyer will insist that he go with you to your bank so that he can write his check directly to the bank, have you add your additional cash if you are upside down, get the title immediately, have you sign over the title to him right then and there, and give him the car keys. That way, there are no delays and no mess. Nice and clean and quick.

Summary

So if you want to sell your car when you are still making payments, yes, it can be done. However, if you still owe more than your car is worth, it is much more difficult — and sometimes impossible.

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