Do you think you have to wait until your car loan is fully paid off to sell your vehicle? Think again. It’s entirely possible to sell a car you haven’t paid off yet. Here at scrapcar.cash, you can sell your car online, even with an outstanding loan. We’ll take care of the loan payoff process for you. If you owe more than the car’s value, you can settle the difference with us in a single transaction.
Here’s a step-by-step guide to help you through the process of selling your financed vehicle in Ontario.
Process of Selling Your Financed Vehicle in Ontario
1. Understand Your Loan Terms
Before you start the selling process, it’s crucial to understand the terms of your car loan. Contact your lender to find out the exact amount remaining on your loan, known as the payoff amount. This includes the remaining principal, any accrued interest, and potential early termination fees.
2. Determine the Car's Market Value
Next, assess the current market value of your car. Use resources like Canadian Black Book, and local listings to get an accurate estimate of what your car is worth. Comparing the market value with your loan payoff amount will help you understand if you’re in positive or negative equity (owing more than the car is worth).
3. Prepare the Car for Sale
To get the best possible price, ensure your car is in good condition. Clean it thoroughly inside and out, fix any minor repairs, and consider getting a professional detailing service. Gather all maintenance records and receipts, as these can assure potential buyers that the car has been well-maintained.
4. Find a Buyer
You have several options for selling your car:
- Private Sale: Selling directly to another individual can often get you the best price. Use online marketplaces like Kijiji, AutoTrader, or Facebook Marketplace.
- Dealership Trade-In: While not always the best value, trading in your car at a dealership is convenient and can be a quick way to settle your loan.
- Car Buying Services: Companies like Carfax and Clutch offer to buy cars directly, providing a hassle-free option.
5. Inform the Buyer About the Loan
Transparency is key. Inform potential buyers that there is an outstanding loan on the car. This can initially be a deterrent for some buyers, but many will still be interested if you explain the process clearly.
6. Arrange to Pay Off the Loan
Once you have a buyer, you need to arrange the loan payoff. Here’s how:
- Private Sale: Arrange a meeting with the buyer and your lender. The buyer pays the lender directly to cover the payoff amount. If the selling price is higher than the payoff amount, you will receive the difference. The lender then releases the lien, allowing you to transfer the title to the buyer.
- Dealership Trade-In: The dealership will handle the loan payoff as part of the trade-in process. They will pay the lender and deduct the payoff amount from your trade-in value.
- Car Buying Services: These services often handle the payoff directly with the lender. Ensure you get confirmation of the loan payoff and lien release.
7. Complete the Paperwork
In Ontario, transferring car ownership involves several documents:
- Used Vehicle Information Package (UVIP): Obtain this from Service Ontario. It includes details about the car’s history and is required for a private sale.
- Bill of Sale: This document should include the vehicle details, sale price, and both parties’ information and signatures.
- Safety Standards Certificate: This certificate proves the car has passed a safety inspection and is necessary for transferring ownership.
- Transfer of Ownership: Complete the back of the vehicle permit and submit it to Service Ontario with the required documents and fee.
8. Cancel or Transfer Your Insurance
Once the sale is complete, contact your insurance company to cancel or transfer your policy to your new vehicle if applicable. Ensure you get a refund for any unused premium if you are canceling the policy.
Ready to Sell Your Financed Car for Cash?
Is It a Good Idea to Sell a Financed Car?
Deciding whether to sell a financed car depends on your individual circumstances. Here are some factors to consider:
Financial Benefits
Selling your car can provide immediate cash, which might be beneficial if you need funds urgently or want to invest in a different vehicle.
Loan Terms
Review your loan agreement for any early payoff penalties or fees. Some loans might charge extra if you pay off your balance early.
Equity Position
Understand whether you have positive or negative equity in your car (more on this below). Positive equity means you could receive money after paying off the loan, while negative equity means you’ll owe more than the car’s value.
Current Market Value
If your car’s market value is high, it might be an excellent time to sell. Conversely, if the market is down, you might get a lower return.
Future Depreciation
Cars depreciate over time. Selling now might fetch a better price compared to waiting and selling later when the car’s value has decreased further.
Understanding Positive and Negative Equity in a Car
When selling a financed car, it’s crucial to understand the concepts of positive and negative equity:
Positive Equity
You have positive equity when your car’s market value is higher than the remaining loan balance. For example, if your car is worth $20,000 and you owe $15,000 on your loan, you have $5,000 in positive equity. In this situation, you can sell the car, pay off the loan, and keep the difference.
Negative Equity
You have negative equity when your car’s market value is less than the remaining loan balance. For example, if your car is worth $15,000 and you owe $20,000 on your loan, you have $5,000 in negative equity. In this case, you will need to pay the lender the $5,000 difference to settle the loan when you sell the car.
Implications for Selling
- Positive Equity: Selling a car with positive equity is straightforward. You can pay off the loan with the sale proceeds and pocket the remainder.
- Negative Equity: Selling a car with negative equity requires you to cover the difference between the sale price and the loan payoff amount. This can be managed through a lump sum payment or rolling the negative equity into a new loan if you’re purchasing another car.
Alternatives to Selling a Financed Car
If selling a financed car isn’t the best option for you, consider these alternatives:
Refinancing Your Loan
Refinancing can help lower your monthly payments or interest rate, making it more manageable to keep the car until it’s paid off.
Lease Transfer
If you’re leasing, consider transferring the lease to another individual. Many online platforms facilitate lease transfers, allowing you to exit the lease without selling the car.
Trading In
Trading in your car at a dealership can be a convenient option. The dealership will handle the loan payoff, and you can apply any positive equity toward the purchase of another vehicle.
Related Article: How to Get the Best Value for Your Scrap Car
FAQ
Yes, you can sell a car with an outstanding loan in Ontario. You need to pay off the loan balance before the buyer can receive a clear title. Many buyers and services, such as scrapcar.cash, will handle the loan payoff process for you.
The payoff amount is the total amount needed to pay off your loan completely. It includes the remaining principal, any accrued interest, and any potential early termination fees.
Contact your lender to get the exact payoff amount. They will provide you with the current balance and any additional fees that need to be paid.
If you owe more on your car than its market value, you are in negative equity. You will need to pay the difference between the loan balance and the selling price to your lender when the car is sold.
To sell your car privately, you need to coordinate with your lender and the buyer. The buyer will pay the lender the payoff amount directly, and any remaining balance will be paid to you. The lender will then release the lien, allowing you to transfer the title to the buyer.
Yes, dealerships can handle the loan payoff as part of a trade-in process. They will pay the lender the remaining balance and deduct the payoff amount from your trade-in value.
You will need several documents to sell your car in Ontario:
- Used Vehicle Information Package (UVIP)
- Bill of Sale
- Safety Standards Certificate
- Transfer of Ownership form
Car buying services, like scrapcar.cash, will manage the loan payoff process for you. They will pay the lender directly and handle all necessary paperwork, simplifying the process for you.
Yes, you can transfer your car insurance to your new vehicle. Contact your insurance provider to update your policy or cancel it if you no longer need coverage. Ensure you get a refund for any unused premium if you cancel the policy.
If you don’t have the full amount to cover negative equity, you can either pay the difference out-of-pocket or explore refinancing options. Some buyers or car buying services may allow you to handle the negative equity as part of a single transaction to simplify the process.