If you paid cash for your car or have already paid off the original bank loan, you own your car free and clear and have access to the title -- making selling the car to another individual a relatively simple process. If you’re still making payments on your car and want to sell it, however, you can’t sign over the car title to the buyer because you don’t have the title. The bank will hold your vehicle’s title until you pay off the loan balance you still owe. There are two methods for selling a car with a bank loan, depending on whether your lender holds your title at a local branch or out of state.
Locally Held Title
Call the bank and notify the bank representative you speak with of your intentions to sell the car. Ask for a final payoff amount. Depending on whether your loan carries a prepayment penalty, the final payoff amount may differ from the amount reflected on your monthly statements.
Meet the buyer at the bank branch that holds your car’s title. Instruct the buyer to make the payment directly to the bank rather than to you. Provided the purchase price equals the amount you owe on the loan, the bank will then provide you with the title.
Sign the car title over to the buyer. Fill out a bill of sale recording the date of the transaction and the purchase price.
Ask a bank employee to make two copies of the bill of sale. Give one copy to the buyer and keep one copy for your records.
Title Held Out of State
Meet with the buyer and conduct the sales transaction without the title. Fill out three copies of the bill of sale. Give one to the buyer, keep one for yourself and keep one for the Department of Motor Vehicles.
Visit the buyer’s county’s Department of Motor Vehicles with the buyer. Provide the DMV with a copy of the bill of sale. Request a temporary operating permit for the buyer until you can provide her with the car’s title.
Pay off the vehicle loan with the proceeds from the sale. The bank will mail you the title. How quickly you will receive the car title will vary depending on the bank.
Sign your name on the title under “Seller" when you receive it in the mail. Deliver the car title to the buyer.
Warnings
If you owe more than the purchase price of the vehicle, you must pay the bank the difference before it will release your car’s title.
Hand-deliver the car title to the buyer if possible. Legal complications could ensue for both you and the buyer if you mail the car title and it ends up in the wrong hands or gets lost in the mail.
References
- Edmunds.com: 10 Steps to Selling Your Car
- MSN Money: How to Sell a Car You Don’t Own
- Texas Department of Motor Vehicles. "Add or Remove a Lien on a Vehicle." Accessed Jan. 23, 2020.
- Consumer Financial Protection Bureau. "What Is a Payoff Amount? Is My Payoff Amount the Same as My Current Balance?" Accessed Jan. 23, 2020.
- Federal Trade Commission. "Financing or Leasing a Car." Accessed Jan. 23, 2020.
- Consumer Financial Protection Bureau. "What Happens If I Still Owe Money on the Vehicle I Want to Trade-In?" Accessed Jan. 23, 2020.
- Idaho Transportation Department. "Vehicle Titles," Page 2. Accessed Jan. 23, 2020.
- Consumer Financial Protection Bureau. "What Is Negative Equity in an Auto Loan?" Accessed Jan. 23, 2020.
- Alaska Division of Motor Vehicles. "Title Change—Add or Remove an Owner." Accessed Jan. 23, 2020.
- State of California Department of Motor Vehicles. "Vehicle Registration and Title Information." Accessed Jan. 23, 2020.
- Magnussen Toyota of Palo Alto. "Should I Trade in My Car or Sell It to a Private Party?" Accessed Jan. 23, 2020.
- Federal Trade Commission. "Auto Trade-ins and Negative Equity." Accessed Jan. 23, 2020.
- The Office of the Minnesota Attorney General. "Transferring Title to a Motor Vehicle." Accessed Jan. 23, 2020.
Warnings
Writer Bio
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.