Selling a Car With a Loan: Step by Step

Having a loan left on the car does not stop you from selling it, but there are a couple of things you need to do in the right order. The key is that the loan is settled as part of the sale so that both you and the buyer are protected. Here is how it works.

1. Find out the outstanding debt

Start by contacting your bank or lender and asking for a current payoff amount (lösensumma in Swedish): the amount needed to repay the loan in full right now. Also ask whether the car is financed with itself as security (a credit purchase with a right of repossession) or whether it is an ordinary personal loan with no connection to the car. That affects how the change of ownership can be done.

2. Compare the debt with the car's value

The next step is to set the outstanding debt against what the car is actually worth. You will end up in one of two situations, and they are handled differently.

If the car is worth more than the loan

This is the common and simplest situation. At the sale, the purchase price is used first to pay off the loan, and the surplus is yours. If you sell to a car dealer, the dealer can often handle the whole settlement for you: they pay the outstanding debt straight to the lender and pay you the difference.

If the loan is larger than the car's value

In that case you still have a remaining debt after the sale. You need to cover the difference, either in cash or by moving the remaining debt to another loan by agreement with the bank. It is unpleasant but common, especially early in a car loan, and it is better to deal with it openly than to postpone the sale.

3. Do the change of ownership the right way

If the car stands as security for the loan, the lender must be on board before the change of ownership is registered. When selling to a dealer, this is normally handled by the dealer. If you sell privately, the safest route is to carry out the payoff and the payment at the same time, ideally at a bank branch or through a solution where the money goes directly to the lender.

Why a dealer is often the easiest option with a car loan

Precisely because the loan has to be settled in the right order, selling to a car dealer is often the smoothest route when there is credit on the car. The dealer is used to dealing with outstanding debts, settles the loan directly with the lender and pays the surplus to you. By letting several dealers bid, you also make sure the price, and therefore what you are left with after the loan is paid off, is as high as possible.

Checklist before you sell

• Request the current payoff amount from the lender.
• Check whether the car is pledged or financed with a right of repossession.
• Find out the car's market value by collecting several bids.
• Decide how any difference will be covered.
• Make sure the loan is settled and payment is made at the same time as the change of ownership.

Frequently asked questions