Can I transfer my car loan to another person?


If you still have money on a car loan and want to sell the vehicle, you have several options.

Selling your car while it’s under financing can be a complex process. Source: Studio G-Stock/Shutterstock.

If you take out a loan to buy a car, you agree to repay that loan, usually with interest, until the balance has been paid in full. However, there may be a reason you want to sell the car before your loan ends, whether it’s because your circumstances have changed, you want to buy another car, or you just don’t need it anymore. ‘a car. What options are available to you?

What are your options for selling a car that is under financing?

If you want to sell your car, but it’s still under financing with money owed, you usually have several potential options, including:

  • repay the loan balance yourself and then resell the car, or
  • sell the car to someone else and ask the new buyer to pay off the loan balance.

Can you transfer a car loan to someone else?

It is generally not possible to transfer the balance of your car loan to someone else. Indeed, lenders are bound by responsible lending laws, which means that before agreeing to lend money to someone, they must carry out an assessment of that person’s finances and ability to repay the loan, and ensure that repayment terms are appropriate. for that person’s financial situation.

Although a lender may have been willing to approve you for a car loan, that doesn’t mean they would be willing to approve the person you want to transfer your loan to. .

Generally speaking, if you are considering selling or buying a car that is being financed, a private arrangement between you and the potential buyer or seller may be a more appropriate route, although there are a number of risks involved. of which you should be aware.

Can you sell your car with money owed?

You can sell your car with money owed on it, and it’ll probably be easier for you than trying to transfer your car loan balance to someone else. If you decide to sell your car, with financing due, there are two possible solutions: (1) use your savings to pay off the loan balance, then sell the car; or (2) find a buyer willing to repay the loan balance upon transfer of ownership.

You will also need to consider the type of loan you have and whether it is secured or unsecured. The sales process can be more complex if you want to transfer a secured loan. This is because a secured loan carries collateral and the interest rate to be paid has been calculated based on that. The vehicle itself is often the collateral that gives the lender peace of mind that they can recoup their costs – and the car – if loan payments are missed. CarsGuide states that where a car forms the basis of a secured loan, the “outstanding balance” will still apply to the car, which is known as a charge.

Pay off the balance of your loan and then resell the car

If you have enough money in savings to pay off your car loan balance and want to do this before you sell, you may find it easier to find a buyer. The reason for this is that the car will not be burdened with any loan and the buyer can pay you directly, which will make the transaction more convenient for him.

If you choose to do so, however, it is important to be aware that there may be costs associated with prepaying an auto loan. Some lenders will charge a prepayment fee to make up for the interest they won’t make on the loan, and the amount of this fee can vary, but it’s important to find out with your lender if you’ll be charged.

Find a buyer willing to pay off your loan balance

If you don’t have the funds to pay off your auto loan balance or don’t want to, you may be able to find a buyer who is willing to pay off the loan balance. You will need to be transparent with them that this is your arrangement and that the car they are buying is still being financed, and you will be using the money from the sale to pay off the loan. You will also need to take into account any prepayment or other fees charged by the lender.

This option can be riskier from a buyer’s perspective, due to how auto financing works, especially with secured auto loans. When you take out a secured car loan, the car itself is usually “collateralized” or collateral against the loan, meaning the lender has the right to repossess it if you can’t make the required repayments. If you sell the car to someone else and don’t pay off the loan balance as promised, the new buyer risks having their car repossessed.

As a buyer, if you want extra protection when buying a car being financed, Macquarie Bank recommends asking the seller to get a dated payment quote or letter from their finance provider, and to have this letter sent to you. This way, you can directly pay the balance of money owed and make a separate payment to the seller for any outstanding amount. This means you’ll have peace of mind knowing that the car finance provider has been reimbursed.

Overall, given the potential risks of buying a car on finance, this option may be less attractive to potential buyers and you may find it difficult to sell your car this way. .

On the other hand, if your car loan is unsecured, you will be personally responsible for repaying the balance in the event of a delay in your repayments, and the lender will not have the right to repossess the car. This means the potential buyer won’t have to worry about repossessing their car if you don’t meet the required repayments to your lender.

What to do when selling a car under financing?

If you’re considering selling your car while under financing, here’s a checklist with steps to consider.

  1. Contact your lender to let them know you want to sell your car and find out how much money you have left to pay, as well as any fees you may be charged for prepaying your loan balance.
  2. Find a buyer for your car and be transparent with them. If you have paid off your loan balance with your lender, they will buy it without any charge. If not, let them know the car is still being financed and arrange to have the loan balance paid off.
  3. Finalize the sale of your car and arrange the necessary funds transfer. If you still have money owed on your loan, pay it off with the money you receive from the buyer, plus any fees owed, if that’s what was agreed.
  4. Transfer ownership of the vehicle and file a Notice of Assignment confirming that you no longer own the car. At this point, it will be the responsibility of the new owner to register the car in their name.

Cover image source: G-Stock Studio/

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