Selling while financed

Banks and car dealers do this all the time and the process is easy.

#1 handle the loan - The Buyer needs to contact the sellers bank with the loan number and the vin to verify the loan and get the 10-day payoff. The buyer gets an official bank check for the payoff amount that will be sent to the seller’s bank. If the payoff is less than the agreed price, the buyer will get a second bank check for the difference that goes directly to the seller. If the payoff is greater than the agreed price, the seller will need to include a bank check for the remainder of the playoff and that check is put the envelope with the buyers check. Both the buyer and the seller go to mail box and verify that the envelope is mailed.

#2 bill of sale – You want a notarized bill of sale. Any bank can do a notary. This should include the full name and address and drivers license numbers of both the seller and buyer. Also the VIN and the sales amount. The sellers signature needs to be notarized on this form. Also, verify that the sellers name and address matches the seller on the title/registration. This is a standard form available from the states DMV.

#3 (optional) power of attorney – when the lien release comes in from the bank, the seller will need to meet the buyer at DMV to transfer the title or the buyer will need a power of attorney to sign for the seller. To protect the seller, this power of attorney is only good for transferring the title. Like the Bill of Sale, this is a stand form available at your states DMV. BTW, the power of attorney is what car dealers use when you trade in a car. You typically do not sign the title to the transfer the car to the dealer and instead sign a power of attorney to let them sign the title for you when they sell your car.

This varies from state to state.
In New York you get your title despite the financing, it will be noted on the title whether or not there is a lien on it, and what bank holds the lien.

Once the balance is paid, the bank issues a lien release, which is just a form letter.

The buyer takes the signed over title and lien release to the DMV and gets himself a clean title in his name.

BUT, In New Jersey, the bank holds the title until the balance is paid off.

carcinoid said:

it's still financed through Fifth Third Bank.

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From what I've heard about their interest rates, you should get used to keeping the car for a while.

FYI You can buy a new car for .99% for 36 months and Refi a 16-17 for 1.49% for 36 months thru Pen Fed W/ good credit. It costs $22 to join that's what I did recently.

canyon ed said:

FYI You can buy a new car for .99% for 36 months and Refi a 16-17 for 1.49% for 36 months thru Pen Fed W/ good credit. It costs $22 to join that's what I did recently.

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Most of the credit unions have ridiculously good rates. Most people just go to the dealer and leave it at that. When I bought my Mustang I was preapproved through my CU. The dealer beat the lowest price I'd found IF I'd finance through them and IF they matched the rate the CU was giving me. I took the deal.

You don't even have to have "great" credit - but if you have good "auto loan" credit (yes - they score you differently based JUST on your auto loan payment history) you can get a low enough rate at the Credit Unions that the savings interest rate is actually higher than what you'd pay on an auto loan. Saw this with a friend. He banks at a local CU. Goes to pull out cash to buy a used truck. The manager knows him by name. Asks why he's pulling the money out. Then tells him to leave it in the bank, he can give him a loan with a lower interest rate that what his savings was earning. He did.

This is purely my own personal opinion, but, after too many bad experiences, I wouldn't consider buying a car with a lien on it.

I might be a little different from other buyers in that I hate borrowing money (except for a mortgage). I only buy a car if I can pay cash for it. Whenever I've tried to buy a car with a lien on it from a private seller, it's turned out to be a headache. The problem has been the risk I'd be taking in waiting to get a clear title *after* I would have laid out the cash for the car. It might just be my own experiences, but the lien holders I've tried to deal with wouldn't send a clear title until some time after getting paid - days to weeks - while it gets processed through their "system". I'm just not willing to take the risk that something will hiccup and I'm in the position of having laid out the money, but don't have legal ownership.

I've run into some sellers who insist on getting the money themselves, and me having to 'trust' them to pay off the loan and eventually send me the title. Of course that's ridiculous and a complete non-starter, and just smells like an attempt at a scam.

I guess it's different if a buyer is financing a car. Then it might be a case of one lender talking to another, and working out the title transfer between themselves. So, I think selling a car with a lien to someone who is also getting a loan probably wouldn't be an issue. But, some cash buyers (like me) might get turned off. At this point, the first question I ask when I'm interested in a car is if there is a lien on it, and if there is, I pass.

If you find a private cash buyer and have a deal in hand, you could also consider some kind of short term bridge loan or home equity loan, to pay off the loan and get a clear title in hand to transfer to the buyer.

Just my 2 cents (and worth less than that).

Nick, I can totally understand how someone doesn’t feel comfortable with dealing with the hassle of buying a car with a lien. Also, I agree with you on paying cash. But, if I found a decent used car, and was uncomfortable with dealing with the lien, I would not hesitate to take out car loan with no early payment penalty. For example, I just ran a $30,000 loan, 5 year term, 3% interest rate through an amortization calculator. The interest on the first month was $75, and $74 for the second month. So, I could buy the car, have the bank deal with the transferring the title and then pay the loan off after 1 month. After 1 month I would be out @ $75 and the bank would take care of dealing with the sellers lender. Not sure I would be so quick to walk form that deal.

ctandc72 said:

Most of the credit unions have ridiculously good rates. Most people just go to the dealer and leave it at that. When I bought my Mustang I was preapproved through my CU. The dealer beat the lowest price I'd found IF I'd finance through them and IF they matched the rate the CU was giving me. I took the deal.

You don't even have to have "great" credit - but if you have good "auto loan" credit (yes - they score you differently based JUST on your auto loan payment history) you can get a low enough rate at the Credit Unions that the savings interest rate is actually higher than what you'd pay on an auto loan. Saw this with a friend. He banks at a local CU. Goes to pull out cash to buy a used truck. The manager knows him by name. Asks why he's pulling the money out. Then tells him to leave it in the bank, he can give him a loan with a lower interest rate that what his savings was earning. He did.

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CU's do offer some great deals. Then again so does Ford. Hard to pass up 0% if you qualify. Don't get me wrong. I would like to sell my 2015 GT/PP and buy a GT350 - hind sight being 20/20 and all - but I don't think it would be smart.

I guess 0% may not be an option with the '18 model but the holidays are coming quick and they are usually willing to deal.

the 0% deal is run every last quarter of every year to clear out the current year models and make way for the arriving new year models. so next Oct you surely will see 18s with the 0% offer. i find myself in the same boat, should have waited another year and picked up a 350 as prices have stabilized.

aham23 said:

the 0% deal is run every last quarter of every year to clear out the current year models and make way for the arriving new year models. so next Oct you surely will see 18s with the 0% offer. i find myself in the same boat, should have waited another year and picked up a 350 as prices have stabilized.

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Yeah, I have a friend trying to finalize a deal on a '17 GT. 0% at 72 months from Ford. Pretty sure he said the final OTD (base 6 Speed) including VA TTL was $28.7k.

HotBadgerFart said:

From what I've heard about their interest rates, you should get used to keeping the car for a while.

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I'm happy with my sub 3%, thank you very much.


I've decided to keep the car for now. If I want to sell it this summer, I'll just pay off the loan and sell it that way.

Selling with a lien is a bit of a hassle. Personally I would just pay the car off first, get the title, and then sell it.

Then all you do is a bill of sale and sign over the title. Way easier.

ctandc72 said:

Most of the credit unions have ridiculously good rates. Most people just go to the dealer and leave it at that. When I bought my Mustang I was preapproved through my CU. The dealer beat the lowest price I'd found IF I'd finance through them and IF they matched the rate the CU was giving me. I took the deal.

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Almost a ditto. My dealer got me a loan at 1% less than my preapproved CU loan.

Both CU's I belong to, don't allow haggling on loan rates no matter what your credit score might be.

Chef jpd said:

This varies from state to state.
In New York you get your title despite the financing, it will be noted on the title whether or not there is a lien on it, and what bank holds the lien.

Once the balance is paid, the bank issues a lien release, which is just a form letter.

The buyer takes the signed over title and lien release to the DMV and gets himself a clean title in his name.

BUT, In New Jersey, the bank holds the title until the balance is paid off.

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In PA, the bank shreds the title. Later, when the balance is paid off, tells the DMV (PennDOT) that they lost it. PennDOT then issues a duplicate.

I only mention this, because I can see a few week delay from when you pay off the loan, and physically get a replacement title in hand, to sign over to the new buyer.

pdac said:

Just sell it through carmax and save yourself a bunch of time and headaches. Unless you already have a buyer lined up.

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Ummm, only if you don’t want to get paid very well for the car.