Why Is It So Difficult to Sell a Car Privately?

Selling your car privately may bring in more money, but it can be more difficult than selling it to a dealer.
Whitney Vandiver
By Whitney Vandiver 
Edited by Julie Myhre-Nunes

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Selling your car privately can mean more money than trading it in at a dealership or online retailer. But making the sale can be difficult.

The easiest car to sell privately is one you own outright and for which a buyer is paying cash. Selling a car becomes more difficult when:

  • You have a loan on the car you are trying to sell.

  • You have a loan on the car you are trying to sell that exceeds the value of the car.

  • The buyer needs an auto loan to complete the purchase.

  • The buyer needs to sell another car to afford yours.

Auto dealers pay off loans, arrange financing and take trades every day. You do not.

The upside to selling privately is that you can get significantly more money. A dealer or online retailer must make you a wholesale offer that leaves room for reconditioning and profit.

Here's how to address the hurdles that make selling a car privately so difficult.

You have a loan on the car you are trying to sell

If you still owe a lender money for the purchase of the vehicle, that lender has a lien on the car. This means the lender technically owns equity in the vehicle and won’t transfer the title to you until you pay off the remaining balance of your loan. And you can’t sell a car without the title.

There are several ways to sell a car privately with a lien on it, but they can be complicated processes. Depending on what the buyer is comfortable doing, you might be able to:

  • Pay off the loan to receive a clean title before selling it.

  • Have the buyer transfer part of the purchase money to the lender directly.

The option you choose will depend on your situation, what the buyer wants to do and what your lender allows you to do.

If the buyer is open to working with you to pay off your loan, be as communicative about the process as possible. The process will take longer than simply swapping a check for the keys.

You have a loan that exceeds the value of the car

The resale value of cars changes according to demand, and depending on the terms of your car loan, you might owe more on your loan than your car is worth. This is known as having an upside-down car loan.

You won’t be able to transfer your car’s title to a new owner as long as you owe on your car loan.

There are a few things you can do if you still owe on your car and want to sell it. For example, taking out a personal loan to cover the difference between what you get for the car and what you owe your lender is a possibility. Personal loans aren’t secured by the value of the car, so interest rates are higher. You’ll want to pay it off as soon as you can.

The buyer needs an auto loan to complete the purchase

Qualifying for an auto loan through a dealership is often a simple process thanks to the established relationship it has with lenders.

But not all lenders offer private-party loans, where a dealer is not involved. And those that do often include higher interest rates. This can make it tricky for a potential buyer to get a loan to purchase your vehicle. If a potential buyer says they need to secure financing before they can purchase your vehicle, don’t be afraid to keep your car on the market in case the buyer’s plans fall through.

The buyer needs to sell another car to afford yours

If your potential buyer gets ahead of themselves and wants to buy your car before they sell their own, you might find yourself waiting for their deal to go through before you can get your cash. Similar to how contingency offers on houses can sometimes fall through, waiting for your buyer to sell their car means you’re not guaranteed to make the sale and might have to start over.

To keep your options open, you can continue to advertise your car and talk with prospective buyers in the meantime. Or if the buyer wants to show they’re serious, ask them to put down a deposit — similar to earnest money when buying a house. This will give them time to sell their car while you hold off on accepting other offers.

But be sure to put a time limit on the agreement so you can keep the money and move on if they don’t sell their car within a certain time frame.

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