Selling a car despite a running loan: how do you do it?

Financing at the bank is still ongoing, but you still want to sell your vehicle despite the current loan? In principle, this is not a problem.

However, there are a few peculiarities that need to be considered. For example, the procedure for selling a funded car depends on the type of loan taken out and its terms.

It makes a difference whether you do business through a car dealer that specializes in trading in debt-financed vehicles or whether the vehicle changes hands privately. And what is the best way to go about selling a funded car and buying a new one?

Clarify a few questions before selling

Clarify a few questions before selling

If a financed vehicle is to be sold, at least three partners are always involved: the bank, the buyer and borrower and the seller.

If the purchase of a new vehicle is planned at the same time, an additional lender may come into play.

Regardless of whether or not a new car should be purchased practically simultaneously with the sale of the financed vehicle, a few points should be clarified in advance.

  1. Ask the lending bank about the following: the amount of the remaining loan, the cost of early loan repayment (prepayment penalty, processing costs) and the processing modalities.
  2. Get information on the residual value of the vehicle. Use the Good Finance list to find out about used car ratings and prices. Dealers and appraisers also estimate prices.
  3. Are you wondering how you can finance part of the loan repayment and/or a new vehicle – using your own funds or borrowing? Find out about the credit market.

Tip: Don’t just let a dealer estimate the used vehicle. Get several offers or at least compare the estimated price determined by the dealer with the Good Finance list.

Dealers who specialize in the acquisition of financed used vehicles sometimes tend to “underestimate” the actual value of the vehicle offered.

Selling a car despite a loan: The procedure depends on the type of loan

Selling a car despite a loan: The procedure depends on the type of loan

When it comes to loan financing, car buyers have the choice:

  • You can finance your vehicle with a conventional installment loan.
  • The other option is to finance it with a dedicated car loan. This can be done through a third party bank, through the manufacturer’s bank or through a bank recommended by the dealer.

Financing with a general-purpose loan

There are no particular problems when financing the used car with a classic installment loan. Credit and vehicle purchases have nothing to do with each other.

The borrower and vehicle seller owns the car. He has not signed a security transfer agreement, nor has he handed over the original or copy of the Part II registration certificate (vehicle registration certificate) to any bank.

The owner can do what he wants with the car. The car can be sold, rented or scrapped. As a rule, consumer loans are not secured separately. A silent assignment of wages is almost always enough and sometimes, especially with somewhat higher sums, the co-signing of the loan contract by the spouse or another person.

However, the question of what should happen to the remaining credit must be decided. The remaining credit can simply continue to run (not recommended), it can be partially or completely redeemed from own funds or from the sales proceeds, or the remaining credit can be included in a new vehicle financing and redeemed.

A loan repayment can result in prepayment penalty that may not exceed one percent of the remaining loan amount. The prepayment penalty is only waived if a free early loan repayment was agreed in the loan agreement.

Financing with a dedicated car loan

Financing with a dedicated car loan

Banks offer special auto loans, the terms of which are slightly cheaper than general-purpose loans. However, this advantage has a price. The loan can only be used to finance a specific car purchase.

And in the overwhelming majority of cases, the vehicle must be assigned as security and the original or sometimes a copy of the vehicle registration document must be handed over to the bank.

There are exceptions to this principle. Every now and then, banks are content to send you a contract copy.

The car buyer remains the owner and still receives slightly more favorable conditions. Good Credit is supposed to do this.

Since the ownership of the vehicle remains with the buyer, the buyer does not have to contact the bank when selling, unless the loan agreement provides otherwise. In all other cases, the motor vehicle remains in the buyer’s possession but is no longer the owner.

It does not matter whether he hands the motor vehicle letter to the bank. Even if the original vehicle registration document is not handed over, the bank becomes the owner upon completion of the transfer by way of security.

Here the vehicle owner has to contact the bank before a sale can take place. Banks will not want to prevent the sale. But the processing varies from bank to bank. Some banks only issue the vehicle registration document when the remaining debt, including any costs, has been paid in full.

Only then can the purchase be processed and the seller can transfer ownership of the used car to the buyer.

Other credit institutions are a bit more accommodating. You are satisfied with the purchase contract. If it is sent, they will hand over the admission certificate to the credit customer.

With the registration certificate in hand, the financed vehicle can be sold and the buyer of the used car can, in turn, apply for registration.

Important: The transfer of ownership by way of security must always be reversed if a separate transfer of ownership by way of security has been concluded. Often the banks simply send the original of the contract back to their borrower after payment of the remaining amount.

Only when this contract is canceled does the borrower become the formal owner of the financed vehicle again. As a result, the sale of the vehicle is retrospectively legitimized.

Take out a car loan with small installments

It is recommended to use an installment loan online when taking out a car loan. If you want to take out a car loan online, simply enter the loan amount and the purpose of use in the loan calculator to search for a bank. Those who are looking for a car loan despite Credit Bureau usually turn to intermediaries. You should not only take care of your car loan right from the start, but also if you have already signed the contract. 

Security, best conditions and a large selection.

Security, best conditions and a large selection.

Taking out a car loan on the Internet has many advantages for the borrower, because on the one hand he can save a lot of paperwork because this is done directly on the Internet in a pre-made form, and on the other hand he does not have to go to different credit bureaus and credit institutions just to laboriously to inform the terms of the loans.

Rather, the car loan can be compared conveniently and with just a few clicks on the Internet, where most credit calculators record a variety of different lenders and providers, all of whom immediately enter the corresponding conditions and possible fees in the calculator. This means that debtors who are considering taking out a car loan can also immediately determine which provider is best suited for which type of car loan.

There are not only very different financing options for buying a car, the conditions and services of the individual service providers can also differ significantly depending on the amount of the total loan amount. Taking out a car loan on the Internet is usually always linked to verification using the post-identification procedure.

As part of the post-identification process, the identification of the borrower is checked immediately by the postman: If the borrower is not at home, the procedure is only carried out at the nearest post office. This makes it easy to take out a car loan on the Internet, which in practice usually takes no longer than when the loan is granted directly in a branch.

The main advantage of accessing the network, however, is that there is a larger number of lenders available, all of which can be seen at a glance.

Take out a car loan, rent a car or buy in cash?

Take out a car loan, rent a car or buy in cash?

If you want to buy a new car, you have to come up with an investment amount in the 5-digit percentage range. With such a large amount, it is about how best to co-finance the new car. Should you take out a car loan, rent the car or maybe better pay in cash? According to the 2018 DAT report, 64% of all new vehicles were co-financed in 2017 with a share of 17%.

This means that only every fifth type of new vehicle was purchased without outside financing. Car loans are particularly popular because the amount of the installment and the installment payment are very variable and can therefore be adapted very well to your economic circumstances. In some cases there are special loans from house banks on the net that offer you particularly good conditions.

Even if you have opted for a car loan, you should start now because of the type of financing you prefer. This requires a thorough analysis of your economic situation. The maximum monthly contribution should only be so high that you still have enough financial scope for unpredictable expenses.

Those who can afford a higher monthly fee, for example, can do without or with a small advance payment for the usual installment payment model. In the case of balloon financing, the loan repayment is divided into an advance payment, monthly installments and a final payment. Due to the additional final payment, the monthly fee is cheaper. New cars are rarely paid out in cash.

However, you should only consider paying out in cash if you have enough financial leeway after buying the car. If you make a new car as an individual, it will be available to you for a fixed time. Depending on your economic situation, the current offers for new vehicles and loans, you can choose from various forms of financing.

Compare the offers with each other and choose the one that best suits your financial situation. Take out a car loan, rent a car or buy in cash?