Find out the fair value of your car
The sale of any vehicle should start by getting a reasonable estimate of its value. Kelly Blue Book or Edmunds are two trusted sources for car valuations. In fact, you should get estimates from both sites.
Enter as much detail as you can about the car in order to get the most accurate value. You should focus on “private party,” since this is the sales route that you will be taking. They also provide “trade-in,” in case you want to go down that path, and “dealer retail,” which wont apply since you aren’t an auto dealer.
An accurate estimate of the value will be very important in pricing the car, particularly if there is a loan on the vehicle.
Get your loan payoff balance
Contact the lender who holds your car loan, and ask for the payoff balance. (Note: This will be slightly different than the balance on your last statement, as interest accrues daily.) Then compare the loan balance to the estimated value of the car. That will tell you whether the car has sufficient value to pay off the loan, and allow you to walk away with some cash, or if you will need to write a check upon the sale of the car in order to pay off the loan.
This is an important step if you determine that the likely sale price of the car will not be sufficient to pay off the loan and/or provide you with enough cash for a down payment on the next car you want to buy, you will have to come up with that cash or you won’t be able to sell the car. But you want to know that before accepting an offer from a buyer.
Naturally, the fact that you have a loan on the car will be a complication. Even if there is sufficient value in the vehicle to make the sale worth it, it’ll be harder than it would be otherwise because the lender holds the actual title to the vehicle.
Enlist your lender in the sale
Once you know the payoff on the car loan, and have decided to go ahead with the sale, you should get the lender involved in the sales process. They hold title to the vehicle, and you can’t sell the car without it.
Ask your car lender the best way to proceed so that you can pay off the loan and deliver the title to the buyer in the shortest time possible. This is not an uncommon occurrence, so the lender should have procedures in place.
If you can, hold the sale at the bank that holds your loan
The easiest way to handle the sale of a car that has a loan on it is to hold the sale at the physical address of the lender. That will provide you with the ability to collect the funds from the buyer, pay off the loan to the bank, and transfer the title to the new owner.
Holding the sale at the lending institution has certain other advantages. For one, it represents a neutral site to hold the sale. For another, it gives the sale a more formal tone than if you were to complete it in your driveway. Third, any documents that you may need from the lender will be immediately available. And, finally, you may be able to have the lenders staff make copies or notarize any documents necessary.
This is the best way to go if your loan is from a local bank or credit union. Unfortunately, many loans written at car dealerships come from big national banks like Chase, Capital One, or the financing arms of car manufacturers (Toyota Motor Credit, for example). This makes selling your car with an outstanding loan balance a bit more difficult-but not impossible.