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Getting out of Debt

How to Sell an Upside-Down Car

4 Minute Read

One of the things you’ll hear most often on The Dave Ramsey Show is pretty simple: Sell your car!

Dave generally says that after a caller reveals they have a bunch of their debt tied up in a car loan. Getting rid of the car is one of the easiest and quickest ways to dump a bunch of dead-weight debt.

But sometimes selling the car isn’t so easy. What if you’re “upside-down,” meaning you owe more on the loan than the car is worth?

Know How Much You Owe

First things first: You need to look on Kelley Blue Book for the current value of the car so you know exactly how upside down you are on the car. Once you have an amount, you can go from there to decide what the next steps will be. Before you move forward, be sure to cancel any warranties or extra services you have on the car, if applicable. 

What Would Dave Do?

So what does Dave suggest in this situation?

His advice might surprise you. When Tonya, a caller on The Dave Ramsey Show, asked Dave how to sell an upside-down car, here’s what he said:

“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, 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. Whatever the car does bring will be applied to the loan, and you’ll release the title.”

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 won’t get this to happen . You will simply have to go borrow the money—the $4,000—from your credit union. 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.”

Wait a minute—did Dave just say to borrow money?

In this very specific situation, yes, he did. Like he said, would you rather owe $4,000 to a credit union or $17,000 to a big car company? It’s a matter of the lesser of two evils!

Get the Car Negotiation and Insurance Checklist: Find out how to get the best deal on a car you love! Download your free checklist today!

Save Up to Pay the Difference on the Car

If you are still dead set against borrowing the money for the difference, we totally get it. Save up, eat beans and rice, get an extra job, and fight your way to pay the difference off. It’s still doable!

Related Articles

If you’re one of the many folks stuck in an upside-down car, then give these approaches a try. And remember, if you do end up selling the car and taking on a smaller loan, the idea is to pay it off as quickly as possible. Work it into your debt snowball and get gazelle intense!

Get even more tools to help you save money, beat debt and change your habits—and that way, you never have an upside-down car again! Take control of your money with Dave’s number one proven plan, Financial Peace University.

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