Selling a Financed Car in Canada: It's Easier Than You Think
Selling a Financed Car in Canada: It's Easier Than You Think
Posted on August 25, 2023
If you want to sell your car, you’ll need to settle any finance you have on it first. That’s especially true if selling privately but however you sell the car, finance will need to be settled at the time or before, otherwise, you don’t have legal title to sell it.
We asked our London auto loans team to explain the process of selling your car under finance before you buy a new one.
You can pay off the auto loan in several ways. You can settle the loan with a payment, trade it in, switch loans or sell the car to a dealership.
Selling a Financed Car
If you use an auto loan to buy a car, you don’t actually own the car until the loan is fully paid off. The loan is secured on the car until settled in full and only then does the title pass to you.
That means you don’t actually have legal title to sell the car until that loan is paid off.
So how can you pay it off?
Lump Sum Payment
You can settle any auto loan with a lump sum payment. You can contact the lender, ask them for a settlement figure, come up with the cash and pay it off in full. Once done, title transfers to you and you can sell the car whenever you like.
You will need a large sum of money though, so isn’t ideal for everyone.
Trade-In & Refinance
You can trade your old car in for a new one and refinance the loan for another that includes the new car. This will require a lot of equity in your current car and a good credit score, but it’s a viable way to dispose of the old car in favour of the new.
Trading in and refinancing an auto loan is a very common way to get a new car. It may mean borrowing slightly more to cover what’s left to pay on the old loan, or a larger down payment to make the numbers work, but it does work.
Personal Loan
If you absolutely have to sell the car, you can get a personal loan to settle the auto loan and do it that way. Personal loans are not secured, so once the car has been paid off, it’s yours to do with what you will.
If that means selling, you now have legal title to sell the car. You can use the proceeds of the sale to pay off the personal loan, or use for something else.
Sell Your Car to a Dealership
You can sell your car to a dealership while still under finance. It’s the only legal way to sell your car while you don’t have legal title to it as we will settle the finance at the same time.
We work with you and your lender and coordinate the sale so we pay off the loan with what we’re paying for the car. The lender then passes title to us and we give you any cash left over.
It involves a fair amount of paperwork but it gets the job done!
If you're ready to sell your car in Southern Ontario, we'd love to buy it! simply fill in the form below to get started.
We’d Love to Buy Your Car!