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Seller’s Guide

How to Sell a Financed Car: Step-by-Step Guide

how to sell a car with a loan

Selling a vehicle that you own outright is a little easier. Before agreeing to the deal, every individual buyer wants to see your title and make sure there are no outstanding debts.

But, the process of selling a car with a loan can be intimidating. So, as a seller, you need to necessitate a few extra steps to close the deal smoothly. Find here how to sell a car with a loan hassle-free.

Steps for Selling Financed Car

Selling a car with a loan to a dealership is less problematic than the individual buyer. Therefore, you should explore the options wisely. Check these simple steps for selling financed vehicle hassle-free. 

Step 1- Know the Basics

  • Start with the basics first. Use a car price calculator available on different online auto classifieds. First, enter the essential details about your automobile, including its year, make, model, etc. Then, choose the value based on how you plan to sell the vehicle.
  • As a car owner, you won’t be able to sell your second hand car until you get the NOC (No Objection Certificate) from the bank or financial agency. 
  • Removal of HP (hypothecation) is required from the RC. HP is written in the RC when it is a financed car which shows that the ownership of the vehicle still lies with the financing agency/bank. 
  • A loan closure letter is also needed while selling a car with a loan. 
  • Foreclosure of the car finance is possible only after the completion of the lock-in period
  • Two copies of Form 35 along with the original RC, a self-attested photocopy of the PAN Card, and a copy of auto insurance are also required.
  • PUC (Pollution Under Control Certificate) is also essential while selling a financed car to a dealership or the individual buyer. 

Step 2- Estimate the Payoff Amount

  • Second comes the payoff amount, which is an outstanding balance you need to pay to the bank to foreclose the auto loan. The simplest approach to find out how much you owe is to contact your lender directly. 
  • This amount may differ from the balance amount because it includes outstanding interest, fees, and prepayment penalties imposed by the lender. 
  • Once you have the exact payout amount subtract it from the car’s present market value. If the value of your vehicle exceeds the amount owed, it shows positive equity. It means that you will close the deal with handsome earning.  
  • However, if the outcome is negative, you owe money on your car. Therefore, when you sell a car with negative equity, you need to provide the lender with the entire proceeds from the sale to pay off the negative equity.

Step 3- Documentation Process 

  • Next comes is documentation. While selling your car with a loan, you must transfer the title to the buyer and allow the vehicle’s registration in the buyer’s name. 
  • Secondly, obtaining NOC from the bank, removing hypothecation from the RC, and submitting the same to RTO can be time-taking, so consider these extra days.  
  • Along with the bill of sale, original RC, Form No.29, Form No.30, Form No.35, Form No.28, vehicle owner manual, original warranty papers, service history documents, etc., are also need to handover to the purchaser.

Step 4- Close the Deal

  • You could ask the buyer to pay the remaining EMIs of the car loan to the lending bank to cover any outstanding balance. It is so because if the buyer buys your financed car and your outstanding balance exceeds the price of the vehicle, you will have to make up the difference. By doing this, you can clear your debts formally, without any interference from the lender.
  • Be open and honest with a possible buyer about any outstanding debt. Remember, you don’t want the customer to walk away from a good deal because of financing-related issues. Always disclose information about your car to avoid buyer’s remorse. 


Buyers will often refuse to pay unless you have a clear title. Therefore, knowing the steps of how to sell a car with a loan, how much you owe on it, and whether you have negative or positive equity makes the process go more smoothly. Moreover, maintaining an open line of communication with the lender and the buyer ensures a fair deal for all.

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