Selling your car while you still have a loan can seem tricky, but it’s easier than most people think once you know the steps. Whether you’re eyeing a newer model, need more space, or simply want to free up cash, the process comes down to knowing exactly what you owe, what your car is worth, and how to structure the sale.
In this guide, you’ll learn how to calculate your loan payoff amount, determine your car’s market value, choose the best selling option, and complete all the paperwork without costly mistakes. Whether you have positive or negative equity, you’ll see exactly how to handle the transaction so you can move on from your current loan with confidence.
How to Sell Your Car With an Auto Loan in 5 Clear Steps
Selling a car with an outstanding loan isn’t as hard as it sounds. The key is knowing your payoff amount, your car’s current value, and the best way to handle the sale based on those numbers.
With a clear plan, you can pay off your loan, transfer the title, and move on to your next vehicle without getting stuck with extra debt.
1. Get Your Exact Loan Payoff Amount
Start by finding out exactly how much it will cost to pay off your auto loan today. This payoff amount is different from the balance on your monthly statement because it may include interest that’s accrued since your last payment and any prepayment fees.
Call your lender—whether it’s a bank, credit union, or finance company—and ask for your current payoff amount. Have your account number and possibly your vehicle identification number (VIN) ready. Many lenders also list the payoff amount in your online account.
Ask how long the payoff quote is valid, since interest charges can change the total daily. Getting this number ensures you know the exact figure you’ll need to close out the loan when you sell.
2. Check Your Car’s Market Value
Once you know your payoff amount, find out what your car is worth. Use valuation tools like Kelley Blue Book or Edmunds to estimate its market value based on make, model, year, mileage, and condition. Be honest about its condition so your expectations are realistic.
If your car’s value is higher than your payoff amount, you have positive equity—you can pay off the loan and keep the extra cash. If it’s lower, you have negative equity, often called being “underwater” or “upside down” on your loan. That means the sale won’t fully cover what you owe, and you’ll need to decide how to handle the difference.
3. Pick the Best Way to Sell a Car You Still Owe Money On
Once you know your payoff amount and market value, decide how you want to sell. The right choice depends on whether you want convenience, the highest price, or the fastest sale.
Trade-In
Trading in is the simplest option if you’re buying another car. The dealer handles the loan payoff and all the paperwork. If you’re underwater, they may offer to roll the negative equity into your new loan—but that means you’ll still be paying for part of your old car, which can lead to higher monthly payments and more interest over time.
Private Sale
If you want the most money for your car, selling to a private buyer usually beats a dealer offer. This can be especially helpful if you’re upside down, since a higher sale price might cover more of what you owe. The trade-off is more work—you’ll need to advertise, meet with buyers, negotiate, and handle the payoff yourself.
Direct Sale to a Dealership
You can also sell your car directly to a dealer or used car lot without trading in. This option is faster than a private sale and can pay more than a trade-in, though usually less than selling privately. Just be sure the offer covers your payoff amount—or be ready to pay the difference if you’re underwater.
4. Handle the Sale Based on Positive or Negative Equity
How you close the deal depends on whether you have positive or negative equity.
If You Have Positive Equity
You’re in a good position. In a private sale, the buyer pays you, you pay off the loan, and keep any extra as profit or a down payment on your next car. If you trade in, the dealer applies the equity toward your next purchase.
If You Have Negative Equity
Selling gets trickier when you’re upside down. If possible, pay the difference from savings. If that’s not an option, consider a personal loan to cover the shortfall—though this moves the debt instead of eliminating it. In rare cases, the lender may allow the buyer to assume the balance, but that’s uncommon and requires their approval.
Dealers may let you roll the negative equity into a new loan, but this raises your monthly payment and the total interest you’ll pay. Given today’s still-strong used car prices, shop around—some dealers may be willing to buy out your loan completely to earn your business.
5. Step 5: Complete the Title Transfer and Close Out Your Loan
The final step is transferring ownership and officially closing your loan. This protects the buyer’s rights to the vehicle and removes your financial responsibility for it.
Transfer the Title
The title, or “pink slip,” is the legal proof of ownership. You must sign it over to the buyer—whether it’s a dealer or private party—according to your state’s rules. Both you and the buyer will typically sign and date the document. If the sale happens remotely, use a secure method such as registered mail to send the title.
If your lender still holds the title, they’ll release it once the loan is paid off. In some cases, it goes directly to the buyer; in others, it’s sent to you to sign over. Ask your lender in advance how they handle this step.
Close the Loan and Get a Lien Release
After the loan is paid in full, notify your lender that the vehicle has been sold. They should send you a lien release—a document proving the debt is cleared and the lender no longer has a legal claim on the car. Keep this for your records.
Paperwork Checklist for Selling a Car With a Loan
Make sure you have these documents ready before finalizing the sale:
- Vehicle title: The legal proof of ownership, signed over to the buyer.
- Bill of sale: Records the sale terms, price, and parties involved.
- Lien release: Shows the lender no longer has a legal claim on the car.
- Odometer disclosure: Required in most states to record mileage at sale.
- Loan payoff letter: Confirms the exact amount needed to close your loan.
Monitor Your Credit Report
Once your lender reports the loan as closed, check your credit report to confirm the account is marked as paid in full. Closing a loan may cause a small, temporary dip in your credit score by lowering the average age of your accounts or affecting your credit mix.
Getting a new auto loan shortly after will restore your mix but may cost you a few points from the new account and hard inquiry. You can recover quickly by making all payments on time.
Final Thoughts
Selling a car you still owe money on takes extra planning, but it’s completely doable. The key is to know your payoff amount, know your car’s value, and choose the selling method that works best for your situation.
After the sale, transfer the title, close the loan, and keep your lien release for your records. With the right steps, you can move on to your next vehicle without added debt or unnecessary stress.
