Typically, most car owners wait to pay off their car loan before selling their used vehicle. However, if you find yourself stuck with a car you want to get rid of, you might want to know how you can have someone take over a car loan so you can sell the car before the contract ends. Though transferring an auto loan is not common, there may be ways borrowers can go about it depending on their lender and loan agreement.
Selling Your Car With an Auto Loan
Why might a car owner want to sell their vehicle before their loan has been paid off?
There are several reasons why you might want to transfer your car loan. When buying your car, you might have been a little too ambitious for the size of your wallet. If you bought a fancy car you couldn’t realistically afford, your car payments might be too high for your monthly budget.
Perhaps you are simply ready for a new car or need to upgrade because the size of your family is growing. In this case, you may not want to or be able to wait until the loan is paid off to get your new vehicle which means you need to find a buyer who could take over the auto loan and monthly car payment.
Is It Possible For Someone To Take Over Your Car Payments?
Having car loans taken over by a new borrower is not always possible; even when it is, the process can be quite complicated. But when the current and new owner are willing to jump through the hoops necessary, some lenders will allow a new person to take over the loan.
Before starting the process, you will want to be positive that transferring the loan is the best and only option. If you can manage to pay off the loan before selling it, you could save a lot of time and effort. You would receive the money back through the sale of the vehicle. However, many people don’t have that kind of cash sitting around, so having someone else take over the loan might be the only option.
How To Sign Over an Auto Loan
Once you have determined that you want to transfer your auto loan and monthly payments, these are the basic steps that you will need to follow to have the new owner take over the loan:
Review Your Loan Agreement
Before getting in contact with your lender, you will want to review the car loan agreement carefully. Read the loan’s contract thoroughly, including the fine print, to see what options it has for handling your existing loan. Reviewing the contract will also equip you to speak knowledgeably with the lender, which might make them more amenable to your requests and suggestions.
Contact the Lender
Next, you will need to contact the lender to see if they are willing to work with you to transfer over the remainder of the loan term. Depending on their policies, the lender will explain if a transfer of the original loan is possible and what is necessary to complete one.
If it turns out that it is against your contract to transfer the original loan, then you can ask your lender about the possibilities of refinancing the auto loan in the potential buyer’s name.
Go Over the Original Contract With the Potential Buyer
If you receive the go-ahead to make a loan application for a transfer, your next step is to meet with the potential buyer to go over the old loan terms. The person assuming the loan will need to undergo a credit check and meet the lender’s requirements. They will likely want to review the contract with the original lender before applying and negotiating the takeover terms.
Negotiate New Loan Paperwork
You, the persona assuming the loan, and the lender will work together to come up with terms for the new loan that works for everyone. Once the car loan payments, loan amount, and interest rates have been agreed upon, you will return the transfer paperwork to the lender for loan approval.
Apply For Auto Loan Transfer
The lender will likely perform their own check on the new owner’s credit report to ensure they don’t have a bad credit score and aren’t in a precarious financial situation. While there are personal loan options for poor credit scores like online no credit check loans and similar, an auto loan transfer will typically require a good credit score.
Once the new loan is approved, the person who purchased your car will become the primary borrower on the car loan and assume all the remaining car payments. Whatever positive equity you’ve already built up in the car before the sale, you will likely receive direct compensation for the transfer. This way, you are free to move on to purchase your next vehicle and cover your new car payments.
Benefits of Buying a Used Car
When purchasing a car, buyers have the choice to get a brand new vehicle or a used one. Many people think that a new car with zero miles is always the way to go. However, there are a significant amount of benefits that come with buying a used car instead of a new one.
Most of the Depreciation Has Already Occurred
When you buy a used car, a considerable bulk of the depreciation has already taken place, so you won’t be losing equity as quickly as you would with a new car. Cars depreciate incredibly fast within the first few years, which is why it can be so easy to become “underwater” on auto loans for new vehicles. You are less likely to owe more on auto loans than the car is worth when you buy a used vehicle because it has already done most of its depreciation by the time you purchase it.
Saves You Money
Buying used can save you a significant amount of money. On average, used cars are nearly half the price of new cars. You may be able to pay a larger portion of the car’s price in cash so that you can take out a smaller loan amount and have more affordable loan payments. Shorter terms and lower payments can help you save money on interest and pay off the loan faster.
Lower Car Insurance Premiums
Your insurance company is likely to offer you lower insurance premiums on a used car since they will cost less to repair or replace if an accident occurs. Additionally, you probably won’t need to purchase gap insurance to account for the quick depreciation in equity that you’d experience with a brand new car. Basically, you will be able to pocket more money for yourself each month without the high insurance costs for new vehicles.
Avoid Extra Dealership Fees
You might be offered a great deal on a new vehicle that seems perfect. But, oftentimes, new vehicle dealerships can charge costly fees. These fees can be for any number of things and sometimes remain hidden until you are deep in the buying process. Used vehicles are less likely to have random fees attached to them at every turn.
References:
Can Someone Take Over My Car Loan? | Lantern by SoFi