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Can you Sell a Car with Negative Equity to a Dealership?

Can you Sell a Car with Negative Equity to a Dealership?

Selling a car with outstanding finance limits your options to trading in or selling to a dealership. if you Sell a car with negative equity, it limits your options a little further. Anything is possible with the right approach but you need to know what you’re in for.

 

That’s what today’s post is all about.

 

We had a customer drop into our dealership the other day needing to sell their car to help avoid defaulting. They had an outstanding auto loan and negative equity.

 

Fortunately, we were able to help them. If you find yourself in a similar situation, we may be able to help you too.

 

Auto loans and negative equity

 

Negative equity refers to when the loan secured on an asset is worth more than the asset it is secured upon.

 

For example, our customer had bought a new car that cost $30,000. They used a no money down auto loan, so the entire amount was included in the loan.

 

Now, a little over a year later, the car is worth $20,000 due to depreciation but the outstanding amount on the loan is $25,000. This means they owe $5,000 on the loan.

 

Negative equity is common in new car loans because cars depreciate quickly before evening out. The situation fixes itself after a while as the amount you pay off on the loan brings the amount down to the same, and then less than the car is worth.

 

That takes time though. Time this customer didn’t have.

 

Selling a car with negative equity

 

You can only sell a car with negative equity if you have the cash in the bank to pay the difference.

 

You can only usually sell a car with finance to a dealership unless you know a private buyer willing to trust you enough to pay you for the car without being given the title. We don’t know many of those!

 

So, to sell a car with negative equity requires a few things:

 

  1. You having a settlement figure from your lender
  2. You having the lender’s agreement to sell the car and settle the loan early
  3. The car being in good condition, clean and tidy
  4. You having the spare cash to make up the shortfall between sale price and loan amount
  5. Having a spare couple of hours to visit our dealership to work everything out

 

The process is relatively straightforward. We appraise the car, value it and make you an offer.

 

If you accept the offer, we work with your lender to settle the loan with the money we offer. You will then have to liaise with your lender to pay them the balance of negative equity so the loan is fully paid off.

 

Once lien passes to us, you’re free and clear and can go about your day.

 

There’s a bit of paperwork and a bit of coordination between all three parties but it’s simple enough when you know how.

 

As long as you have that extra cash available to settle the negative equity. If you have that, you’re golden!

 

For any questions or concerns, please don't hesitate to contact us here!

 

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