How To Sell A Car To A Dealership When It Is Still Being Financed

How To Sell A Car To A Dealership When It Is Still Being Financed

When it comes time to upgrade your current financed vehicle, you may wonder if selling or trading it to a dealership is possible while you still owe money on the loan. Paying off the financing first can be costly, but is turning in your car while still making payments doable?

With careful preparation and coordination between you, the lender, and dealership, selling a financed vehicle before the loan term ends is feasible. Read on to learn the important steps to navigate this process smoothly.

Understand Your Loan Terms

Before attempting to sell your financed car, fully understand your current loan agreement’s terms, specifically:

  • Remaining principal owed – Review statements to see total payoff amount still due.
  • Early payoff penalties – Many lenders charge fees for paying the loan early.
  • Liens – The lender likely has a lien on the title until loan maturity.
  • Co-signer complications – If someone co-signed your loan, they must be involved to release the lien.
  • Trade-in equity – Check current market value to see if you have positive equity beyond the payoff.

Being aware of these financing conditions allows you to plan the best approach for selling your car with this context in mind.

Research the Car’s Value

Next, spend time determining your current vehicle’s accurate market value by:

  • Checking dealership trade-in quotes online for your make, model, year, and mileage
  • Looking at private party sales prices for your car in your area
  • Inputting your details on independent auto valuation sites like Kelley Blue Book (KBB)
  • Getting the car professionally appraised by a dealership

Different valuation methods provide a fair range for your car’s worth as a data point before visiting dealers. This also tells you how much potential equity you have beyond the remaining loan balance.

Research The Car’s Value
Research the Car’s Value

Clean Up and Photograph the Car

To maximize your car’s appraisal value, give it some attention prior to visiting dealers:

  • Wash and wax the exterior to make it shine
  • Clean the interior thoroughly – seats, carpets, compartments
  • Check all lights and fix any not working properly
  • Ensure the tires have adequate tread depth
  • Collect all service records to showcase maintenance
  • Take high-quality photos showing it at its best

Proper cleaning and photography highlights the car’s appeal and condition for dealers to make the best valuation. Spending this time pays off.

Reach Out to Lenders About Payoff

Prior to dealership visits, call your auto loan lender to discuss:

  • Receiving the exact payoff amount in writing
  • Any fees for paying loan early
  • Process to release lien and provide title upon payment
  • Cancellation of recurring auto payments once settled

Having the lender ready to provide a 10-day payoff quote and lien release when selling simplifies completing the deal. Be upfront about your plans to avoid any surprises.

Reach Out To Lenders About Payoff
Reach Out to Lenders About Payoff

Compare Dealership Trade-In Offers

Now it’s time to get real numbers! Visit multiple local dealerships to compare trade-in offers for your car. Provide each dealer with:

  • Details about your car’s features, condition, and maintenance history
  • Written payoff quote from lender for remaining loan balance
  • Clean title and registration ready to sign over after payoff
  • High-quality photographs to help assess condition

Consider offers from the same brand dealership as well as other brands and independents. Don’t feel pressured to accept an initial offer – negotiate if you feel the valuation seems low based on your research.

Select the Best Dealership Offer

Once you gather all trade-in offers, compare them to your car’s estimated market value range and remaining principal balance. Select the dealership offer that maximizes your net equity after settling your financing. Consider total value, not just the monthly payment.

Notify the winning dealership that you accept their offer and schedule an appointment to complete the deal. Also call your lender so they expect the final payoff.

Select The Best Dealership Offer
Select the Best Dealership Offer

Trading In Your Car at the Dealership

At the dealership, the finance manager will help coordinate the payoff process ensuring the timing flows smoothly:

  • You sign title and paperwork transferring ownership of your trade-in to the dealer
  • Dealer makes electronic payment to your lender for the exact payoff amount on your behalf
  • Lender releases lien and emails title paperwork to dealer
  • Any positive equity between your trade value and loan balance goes to you or your new purchase

Expect this to take 1-2 hours at the dealership. Celebrate paying off your old loan and driving home in your exciting new car!

Things to Consider With Incomplete Trades

  • Negative equity – If your loan balance exceeds the car’s value, you must pay the difference to complete the trade.
  • Gap insurance – It can cover negative equity up to a set amount, reducing out-of-pocket costs.
  • Taxes – Sales tax applies to full vehicle purchase price, not just equity.
  • Co-signers – Any co-signers must authorize removing their name from the old loan.

Selling or trading in a financed car takes coordination but opens exciting possibilities! By understanding the payoff logistics and market value of your current vehicle, you can confidently explore options for your next set of wheels. Drive on!

mistakes to avoid when selling a financed car to a dealership

Not researching your car’s value beforehand – Get multiple appraisals and price estimates so you know its fair market value when negotiating trade-in. Ignoring early loan payoff penalties – Always ask your lender about any fees for paying off the loan before maturity. This affects net equity.

  • Forgetting about sales tax – Sales tax is based on the full purchase price of your next vehicle, not just the equity you have. Factor this in.
  • Not having a lien release – Make sure the lender can provide a title free of any liens upon payoff so ownership transfers smoothly.
  • Accepting the first offer – Negotiate! Dealers will lowball at first. Polite persistence based on fair value research can increase the offer.
  • Skipping cosmetic improvements – A clean, well-maintained car earns maximum appraisal value. Don’t ignore quick fixes.
  • Not reviewing the new financing terms – Don’t just focus on the monthly payment. Consider interest rates, total paid over the life of the new loan as well.
  • Forgoing an inspection – Dealers may miss or ignore issues affecting safety or value. Get an independent inspection to protect your interests.

Failure to involve co-signers – If someone co-signed your loan, they must be included to authorize removing their name upon payoff. Not checking other dealers – Compare trade-in offers from multiple local dealerships, including ones not the same brand as your vehicle.

Here are some potential FAQs to include in an article about selling a financed car to a dealership:


Can I trade-in my car if I still have an auto loan?

Yes, dealerships regularly process payoffs for financed vehicle trade-ins. The loan balance is paid directly out of the sale proceeds.

What information does the dealer need about my existing auto loan?

Bring your loan account number, lender name, payoff amount, phone contacts, and payment mailing address to provide the dealer.

Who pays off my current car loan in a dealer trade-in?

You can pay it off before selling or have the dealer handle the payoff as part of the transaction via signed power of attorney.

How long does it take for the dealer to pay off my old auto loan?

Most dealers electronically pay off loans within 1-2 business days after the sale is completed.

Can I sell my financed car if I’m upside down or owe more than it’s worth?

Yes, but you may need to provide funds to cover the difference between loan payoff and car value.

Will my credit be impacted if the dealer pays off my existing auto loan?

No, your credit will only show the new loan for the car purchased. The old paid loan displays as closed.

How do I know when my old auto loan payoff has been completed?

The lender sends a lien release letter confirming your loan is paid in full. Dealers follow up until the title is cleared.

What documents do I need to sign to sell a financed vehicle to a dealer?

You will sign a power of attorney so the dealer can act on your behalf to settle the payoff with your lender.

Do co-signers on my current auto loan need to be involved?

Yes, you should inform any co-signers that you are selling the financed vehicle and closing out the shared loan.

Can dealerships purchase leased vehicles too?

Yes, the dealer will arrange payment of the lease payoff and any early termination fees to acquire the leased vehicle.


Selling or trading in a vehicle that you still owe money on may seem daunting, but is very feasible with preparation and a collaborative dealership. Be organized with your loan details, get a payoff quote, and be upfront about the financing situation from the outset.

The dealer will be able to accurately appraise your trade-in, explain your options, and handle paying off the existing lien once you sign the necessary paperwork. Maintain open communication with the finance manager throughout the payoff process until the title is cleared.

With some diligence on your end to supply information, the test drive home in your exciting new ride will be that much sooner, even with an outstanding loan. Dealers make payoffs for financed trade-ins every day —your transparency and teamwork with the staff smooths the transition. Drive ahead in confidence knowing the dealer will satisfy your old debt in one seamless auto purchase.

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