Yes, but there are extra steps involved when you sell a vehicle that isn’t paid off. You’ll need to get in touch with your auto loan company to close the loan and get a lien release document. They likely won’t give you a lien release if you still have pending late payments, so you may need to get current on your auto loan prior to trying to sell.

Alternatively, you can go with your buyer to your auto lender and get the new car buyer to pay off the remainder of the loan and then transfer over the title.

At reputable dealerships like DirectCarBuying.com, we have processes in place to make these transactions as easy and seamless as possible. If you owe less than what the car is worth, we can help you get the loan paid off and then give you cash for the difference between what you owed and the value of your vehicle.

You likely won’t be able to sell your car if you owe more on the loan than the car is actually worth. This might be referred to as having negative equity or being underwater on your auto loan.

For example, if you still owe $7,000 on a car that’s valued at $5,000, you’ll need to pay a dealership or a private buyer $2,000 and get them to pay off the remainder of the loan. The seller will essentially need to pay someone to take the vehicle off their hands.

But you might be in a situation where only having to pay $2,000 is better than having to make all $7,000 worth of payments (plus interest) for the foreseeable future on a car that’s worth less than what you owe.

Should You Get a Personal Loan to Pay Off Your Negative Equity Auto Loan?

Whether taking out more debt to pay off a debt makes sense for you depends on the rates and terms of your existing loan and any personal financing you’re eligible to receive. Some people may do this as part of a debt consolidation plan, especially if they’re able to qualify for new personal financing at a rate and terms that are preferable to their existing car loan.

However, some people in this scenario may end up only qualify for a personal loan with higher interest or a longer term than their existing auto loan. If you’re no longer able to make car payments on time due to changes in your finances, you may not have a choice but to find a way out of your vehicle loan, but it’s often better to avoid taking out a loan with worse terms to replace an existing loan.

Why Trade-Ins Are Often Easier If You Have a Car Loan

People with negative equity in their car or those who can no longer afford to make their monthly payments may still need a vehicle to get to work, school or run errands. Trade-ins offer an opportunity for people in those scenarios to downgrade their vehicle to one with an affordable monthly payment.

In many cases the dealer will let you roll negative equity into your new auto loan, so you won’t be forced to come up with extra money to pay off the negative equity before you can switch vehicles.

It’s not necessarily in every car buyer’s best interest to get an extra couple thousand dollars tacked on to their new auto loan. Keep in mind that:

• It will immediately make you underwater on your new car loan
• Old negative equity will still accumulate interest at your current rate
• If you have a longer term or higher rate than your previous loan, you may end up paying more on that debt in the long run

Although trading in a vehicle with negative equity isn’t always ideal, it frequently ends up being the best of several bad options.

Sell or Trade in Your Vehicle for a Fair Price in Washington D.C. or Baltimore

Vehicle shoppers in the DMV or Baltimore who need to sell their vehicle should click the “Buy My Car” button on DirectCarBuying.com. As a part of the Easterns Automotive Group in Maryland and Virginia, our customers have access to a massive inventory of pre-owned vehicles to purchase at competitive prices. We are also happy to work with local car buyers and sellers on trade-ins and financing.

Call us at 877-927-6093 for more information.