Selling The Upside Down Car

Tonya asks if you owe more on a car than it's worth, how do you sell it? Dave explains.

QUESTION: Tonya on Twitter asks if you owe more on a car than it's worth, how do you sell it? Dave explains.

ANSWER: You have to borrow the difference. I'm assuming you don't have the cash. Let's say you owe $17,000 on the car and it's worth $13,000. That would leave you $4,000 in the hole, and so you'd have to borrow $4,000. How do you do that? Your best source is to borrow it from the company that has the car loan now. If you have it at a local credit union or a bank or something like that, you could go and sit down with someone and say, "I'd rather owe you $4,000 than $17,000 because I'm what's known as broke. Let me sign a note for whatever the car doesn't bring, and whatever the car does bring will be applied to the loan, and I need you to release the title for that." You can usually negotiate that if you have a small, local community bank or a credit union, because they actually have a brain. If the car loan is with a major national car company, you will not get that to happen with them. You will simply have to go borrow the money—the $4,000—from your credit union, and hopefully your credit is good enough to do that. But in order to get the title release, you have to pay the loan off or have permission from the lender that has the lien on the title. That's the big problem. But it's very, very doable. It happens all the time.

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