How can you sell a car to a private buyer you are still making payments on and the title is with the bank?

Answer 1

It's always easier to sell the car to a new-car dealer, no matter if you own it or the bank owns it but if you have a few months to wait for a potential private buyer, you will make a few thousand dollars more. Note that it's not worth waiting for more than a few months, as you will be making the monthly payments every month. You should place online adds; try free sites like Craiglist and Cars4sale and the popular paid sites. It's better to place basic ads (which cost about $30) on multiple paid sites than to place an expensive ad on a single paid site. You will easily find out which site is more popular from the responses you will get. If you can't find a buyer fast, try decreasing the price. It's a good idea to price the car about halfway between the trade-in value and the private-party value for selling it fast to a private buyer. If you sell it to a new-car dealer, it will take care of all the paperwork but make sure to shop around as new-car dealers will give greatly varying prices on your car. You may find a better price on your car at a dealer far from where you live, as dealers are more competitive in lesser populated areas. If you sell it to a private buyer (this question), follow these simple instructions below:

Now, after the background, the answer to the main question: This is no more complicated, in fact easier, than selling a car you own.

The advantage of selling a car the bank owns is that the buyer cannot defraud you because you don't own the car. Therefore, the process is as simple, yet safer than selling a car you own.

The process is a simple three-step process, which shouldn't take more than about an hour:

(1) Meet with the buyer at the bank that owns your car. Have the buyer bring cash for the value of the car. Note that even cashier checks take up to two days to clear and the bank won't sell the car until the cashier check clears, which will unnecessarily delay the transaction and discourage the buyer. It's, of course, the same problem with a personal check. Therefore, make sure that the buyer comes with cash, not a cashier's check. Then, depending on how much money you own on the car and the selling price, the buyer pays off your loan and you get the remaining money (less money owned than the selling price) or both you and the buyer pay off the loan together (more money owned than the selling price).

(2) Once the loan is paid off, the bank will transfer the title to the buyer. If the bank holds a paper title, it simply signs it off and gives it to the buyer. If the title is paperless (electronic), then, in California, you, the bank, and the owner need to fill out Form DMV REG 227 -- application for duplicate and paperless title. Other states must have similar forms for paperless titles. After the form is filled out, the bank signs and notarizes the form and gives the form to the buyer. (Don't worry -- banks provide notary services as well.)

(3) You and the buyer are basically done at this stage. Your responsibility is to file a release of liability form. In California this can be done electronically. This way you're no longer liable for the insurance and registration of the car. The buyer's responsibility is to take the signed-off title (in case of paper title) or Form DMV REG 227 -- application for duplicate or paperless title, in case of paperless/electronic title -- to DMV to have the title transferred and register the car under his/her name and pay the transfer fee, registration fee, and sales tax. Note that it's only your responsibility at this stage to file the release of liability and if the buyer fails to transfer the ownership of or register the car, you won't be responsible for it.