Selling a car that has a title loan against it

That makes one number the whole decision: the exact payoff, set against what the car will actually sell for.

Why waiting usually costs more

A title loan isn't a slow-moving car note. The CFPB's 2016 study of these loans is blunt about how they tend to go (CFPB):

• Single-payment title loans were available in 20 states. Thirteen let lenders offer both single-payment and installment versions, and 5 allowed them only if repaid in installments.
• The data covered nearly 3.5 million title loans made to more than 400,000 borrowers in ten states from 2010 to 2013.
• Over 80 percent of the loans were reborrowed the same day an earlier loan was repaid.
• About a third of loan sequences defaulted, and one in five ended with the borrower's car repossessed.

The same report points out that you keep driving the car meanwhile, yet late payments give the lender the right to seize it and sell it toward the balance. A car sitting broken in the driveway while the loan rolls over is the worst of both: it isn't getting you to work, and it can still be taken.

If the car has already been towed or held, see impounded car instead.

Get the payoff in writing

The amount you borrowed and your last bill are both stale numbers. The CFPB gives the reasons: the way interest accrues, late fees, and other charges can each move the payoff off the statement figure (CFPB).

Request a figure tied to one specific day. When CFPB examiners review a servicer, one thing they test is whether it supplies an accurate total to retire the loan "as of a specified date" (CFPB exam procedures). Two more questions for the same call:

• Will paying early cost extra? Some auto loans carry a penalty for it, the CFPB warns.
• How will the lien be released once you pay, and where does the title go?

Upside down on a title loan

Line up two figures: the dated payoff and a firm quote for the car in its present condition. A quote above the payoff retires the loan with money to spare. A quote below it leaves you upside down.

The CFPB calls this negative equity: the debt exceeds the car's value, so a sale can't raise enough to settle it (CFPB). Its numbers: borrow $10,000, hold a car worth $8,000, and $2,000 stays unpaid.

A gap means the sale price alone can't pay off what you owe, as the CFPB puts it. Get a realistic value for a junk car before you decide whether that gap is smaller than what more months of payments would cost.

Don't sell around the lien

Signing the car away while the loan is still open isn't a shortcut. Arizona treats selling a vehicle with an unpaid lien, or making a false statement about it, as a class 1 misdemeanor with a $2,500 fine (A.R.S. 28-2098). In the table below, West Virginia and Wyoming also make the seller state the liens under oath or before a notarial officer.

The clean order is always the same: pay off, get the release, then sign the title over.

What a lien release looks like: Ohio

Ohio makes a useful example because its steps are spelled out, and because the BMV itself issues no titles; each county's clerk of courts does (Ohio BMV). After a payoff, the lender releases the lien one of two ways:

Other states differ in the details. Whatever yours is, don't hand over the car until you have the release in hand or on record.

Passing the title, state by state

After the lien is cleared, each state has its own rule for the handoff. Here is the point to watch in each one.

Repair it, keep paying, or sell

• Repair it if the fix is small, the car is worth clearly more than the payoff, and you need it running to keep up with payments.
• Keep paying only if you can get ahead of the loan. In CFPB data from ten states, over 80% of title loans were reborrowed the same day a previous loan was repaid.
• Sell it when the fix outprices the car itself, or when selling is the only realistic route to a payoff.

Selling a title-loan car to us

We buy whole non-running and junk cars, and a title loan doesn't rule yours out. It just adds the payoff step. Send these along with your offer request:

• the title lender's name
• its dated payoff figure
• what the car is (year, make, model), its miles, and the problem

Compare our offer with the payoff before you say yes. If the numbers work, you sign the title to us after the lender clears its lien. You sell the whole car as it sits, and pickup is free anywhere in the US.

Not sure where you stand? Call (877) 421-6008.

Plates and the state sale notice are the final chores; each state's version is on after you sell.