Selling a car that is currently under a finance contract to a dealership can seem like a daunting process, but it is quite simple, provided you get the right information from your finance company. Most cars that are sold to dealerships while still under finance contracts are being traded in, and you may arrange with the dealership to have them payoff any remaining balance on the loan. Thankfully, many trade-in vehicles sold to dealerships are still under finance contracts, so they are familiar with the process. However, just because the dealership is familiar with the process does not mean you should neglect doing research before completing the transaction.
- Skill level:
- Moderately Easy
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Call the finance company. When you first think you might want to sell or trade your car to a dealership, contact your finance company to get the payoff amount on your loan. You will be given a 10-day payoff, after which per diem finance charges will apply. The representative on the phone will give you both of these figures.
Visit dealerships. When you visit dealerships to look at new cars, you should focus more on finding the right new car than discussing your payoff with the salesperson. However, while at the dealership, get a trade-in appraisal on your vehicle. By getting multiple quotes from multiple dealerships, you can compare trade values with the information available on a service like Kelley Blue Book. When on Kelley Blue Book, actual dealer trade-in values are likely to be between the listed fair and good trade values.
Negotiate a good deal. Use information like that on Kelley Blue Book and Cars.com to get a good amount for your trade and a fair value on the new car. When negotiating payments and submitting your credit information to lenders, they will need to know the payoff amount on your loan. You may supply this, but they are likely to call your lender and double check the payoff amount, for their safety and yours.
Review the contract. Make sure that the trade-in value and the trade payoff amount shown on the buyer's order for your new car match what was discussed with the salesperson.
Get all promises in writing. If the dealership is going to pay off your current loan by financing the difference between your trade-in's value and the payoff amount, get this promise in writing. If necessary, hand write the note on the buyer's order and have it initialled by a representative of the dealership.
Tips and warnings
- If a dealership closes or files for bankruptcy protection while in the process of paying off your old loan, you could be responsible for two car payments if the dealership fails to payoff the loan. Your lender will not care that the dealership cannot pay the vehicle off; they will simply want the funds from you.
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