Selling a Car With a Lien

Miranda asks how to sell a vehicle with a lien amount higher than the value.

QUESTION: Miranda on Facebook asks how to sell a vehicle with a lien amount higher than the value.

ANSWER: You have to cover the difference, and there are two ways to cover the difference—well, three. One is you have the money.

Let’s use an example. The car is worth $15,000. You owe $18,000, so that would leave you $3,000 in the hole—upside down by $3,000. How do you get out of that car? The bank holds the title, and until you give the bank the payoff amount of $18,000, you’re not getting the title. If I come along and buy the car for $15,000, you’ve got to have the other $3,000 covered to be able to send it to the bank. I’m going to give you $15,000. You can send that to the bank, but I’m not going to be able to get my title then, so you’ve got to have the other $3,000.

The other $3,000 can come out of your pocket if you’ve got the other $3,000. You could borrow the other $3,000 from your local bank or credit union, or if your car is financed with a local bank or credit union, you could talk them into letting you sign a note for the other $3,000 and work your way through that then as payments there. But one of those three ways, you have to cover that deficit amount or that upside down amount of $3,000 in our example. Then the buyer gives you the other. You send the sets of money over to the bank, which includes the total payoff, and they send you the title and you sign it over to your buyer. That’s how it works.