How To Sell Your Car When You’re Underwater On Your Loan

Written By Mary Beth Eastman
Last updated November 23, 2019

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March 16, 2018

Simple. Thrifty. Living.

Because a car is a depreciating asset, many people often find themselves still owing more on a car loan than the car is actually worth. This is referred to being “underwater” on your loan, or “upside down.” It’s quite a common situation, and to offset the discrepancy, you can try to pay a little more than the minimum payment each month. You will still pay the full amount of the loan plus interest, but you might feel a bit better about it if the loan is paid off before the car value depreciates too much.

Another option is to try to sell the car to try to avoid losing more of your cash through future loan payments on an asset that isn’t worth it anymore. It is possible to sell a car that you still have an outstanding loan on, and there are a few ways to do it.

Before you attempt to sell the car, find out how much it is currently worth using Kelly Blue Book values. They will list a private seller amount and adjustments based on the condition of the car so that you can gain a pretty good idea of what you can list the car for.

Then determine the difference between what you might get for the car vs. what you would still owe on the loan. For example, if you can sell the car for $10,000, but owe $14,000 on the car loan, you will need to come up with the additional $4,000 to completely pay back the loan.

You will also need to explain to the lender or whoever holds the title that you are planning to sell the car in order to facilitate transferring the title to a new owner.

To find the difference in funds to pay the remainder of the loan, you can dip into your savings or take out another loan. While this seems counterproductive, consider that this loan will be for a much smaller amount, enabling you to pay it off much quicker. Consider one of the best online loan sites for this loan.

Another option is to roll over the car loan into another car by trading it in. This option isn’t really recommended, because it just causes you to wind up owing more in the future, and you are likely to be underwater on the new car as well after a few years. If you are considering this, be sure to talk to a reputable dealer to ensure you get a fair and honest deal. You want to save as much as possible if you go this route.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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