When you purchase a car, you typically do not think about the time when you will have to sell it. This is what makes the selling process of your vehicle a painful one. If you are selling your used car that belongs to you free and clear, you will find various platforms where you will be able to do the same. However, if you still owe money on the car that you want to sell, you will be required to go through a certain procedure. This is because the sale of a financed car typically involves a lender and a buyer. The primary idea here is to be clear about your situation to both the lender and the buyer. If you do this, there will be less complications in the sale of your financed car.
Selling a financed car might seem like an intimidating and overwhelming process, but if handled rightly, it can be smooth sailing. There are two important elements involved in the successful sale of a financed car:
- Paying off the remaining debt: You can do this from the sales proceeds that you receive from the buyer of your car. You also might have to put in money from your own pocket if the outstanding debt is higher than the value of your car.
- Transferring the title of the car: Once the sale of the car is done, you will be required to transfer the title to the new owner.
There are multiple things that should be taken into consideration before selling a car that has a loan on it. Some of them have been mentioned below:
- Documentation might be time-consuming: If you own a financed car that you are yet to clear off the EMI for, the registration certificate will have this information. One of the most critical and primary steps in selling a financed car is clearing out the outstanding debt, obtaining a NOC from the respective bank, and submitting it at the RTO. Once the NOC has been submitted at the RTO office, you will receive a new registration card that will not mention hypothecation. The whole activity can be quite time-consuming, and you might end up spending an extra day or two on the same.
- Do the math before the sale: You should always calculate the exact amount of money you owe on your financed car before initiating the sales process. After having done this, compare the amount of money you owe to the total value of your car. Ask yourself if you will be able to earn any profits from the sale of your car that will in turn help you repay the outstanding debt. This is important as every financed/used car has a depreciation value. Therefore, if your car is not in demand at the moment, you might have to face extreme depreciation values. If that is the case, you can always wait and sell your financed car at a point where its value is higher than the pending loan amount. While purchasing a car, it is always advisable to take its resale value into consideration.
- Clear the title of the car: In order to complete the process of sale of your financed car, you will be required to transfer the title to the new owner. This is basically an indicator that the car now belongs to the purchaser and he/she will have the rights to register it in his/her name. This is typically the final step in selling a financed vehicle.
- Consider all the options: You can fix a deal with the prospective buyer of your financed car wherein he/she will be paying off the outstanding debt of your loan. This, however, can only be possible if the pending loan amount is either equal to or less than the outstanding debt amount. In doing so, your car will be free of finance and you can receive the NOC from your respective lender.
In selling a financed car, it is thoroughly important to be completely transparent and honest about your pending loan amount. A well-maintained car is bound to attract customers, therefore, being honest can go a long way in establishing a good rapport with your buyer.