Woody (Forum Supportum)
Woody (Forum Supportum) MegaDork
12/19/21 3:17 p.m.

Of all the used cars that I've purchased over my lifetime, I've never bought one from someone who still owes money on it.

How does this work exactly? I was planning to pay cash when I found the right vehicle, and this one is right within budget, but I'm wondering if I should go through my bank or credit union since they are pros at this, and I'd want a solid paper trail.

The seller did not finance this through a convenient local bank that we can just walk into and complete the transaction.


Steve_Jones Dork
12/19/21 3:21 p.m.

Go through your CU, taking a loan on it. They will cut the check for the amount owed to the other bank, and the leftover to the seller. They then do all paperwork. That's the easy button. 

Tom1200 UltraDork
12/19/21 3:22 p.m.

In reply to Woody (Forum Supportum) :

Have you spoken with the lender?

Woody (Forum Supportum)
Woody (Forum Supportum) MegaDork
12/19/21 3:43 p.m.

In reply to Tom1200 :

Not yet

docwyte PowerDork
12/19/21 5:28 p.m.

So there's a little leap of faith here.  Either do what someone else suggested, or you pay the seller, they pay their bank, the bank releases the lien on the title and sends it to the seller, who then signs it and sends it to you.

The lack of a local bank complicates this greatly, otherwise the two of you walk into the bank, you pay them, give the remainder to the seller, the bank releases the lien, seller signs it there in front of you and hands it to you.

Patrick (Forum Supporter)
Patrick (Forum Supporter) MegaDork
12/19/21 5:38 p.m.

Bought a truck from a guy with a navy credit union loan on it.  He just wanted the balance paid for the truck so mailed a check directly to them(took truck as collateral with a note that he would call me when the title arrives) with "payoff for michael x 1988 silverado vin xxxxxxxxxxxxxxxxx" and they mailed him the title and I picked it up.  Probably sketchy but it worked 

dps214 Dork
12/19/21 6:10 p.m.

The only time I did it was not really how I wanted it to go, but ended up being pay owner, collect car, have faith that they'll send me the title when they get it and not just report the car stolen. It was also a long distance sale being done through a friend of mine who was local to the car, so it was a bit extra sketchy but it all worked out. A friend recently sold a car (er...UTV) that he had a loan on. He took a ~10% deposit from the buyer, got a short term personal loan to pay off the real loan, then once he had the title they completed the sale and he immediately paid off the personal loan with the sale money.

californiamilleghia UltraDork
12/19/21 6:18 p.m.

What do you do when you cannot find the Bank / Finance company  that went out of business  years ago that holds the lien ?

and its been 10 years or more !

P3PPY Dork
12/19/21 7:24 p.m.

Looked into it for the minivan shopping this summer. Escrow is really the only way to go AND cover your bases. It's like $250 or so. Lady refused so I walked.


But even if they cooperate, a lot can still go wrong before *you* actually own it. Like an Audi I almost bought this fall. I contacted his bank and they said there was no way to send title directly to me. He was having trouble selling it like this so he went ahead and paid it off and went to get the title himself first and then sell . This guy totally seems on the up and up but 2+ months later it's still a pending sale (to someone else, I bowed out). I texted him about it out of curiosity and the title got lost in the mail. There's apparently a real hassle with getting a new one too. 
All that to say, there is definite value in the seller already possessing the title. 

dj06482 (Forum Supporter)
dj06482 (Forum Supporter) UltraDork
12/19/21 7:55 p.m.

The challenge is that titles can take several weeks to arrive, even in the best of circumstances. So if you paid him the money, you'd need to trust that he used that money to pay off the car, and then you get to wait for a while before the title comes back to him, then he has to mail it to you. There's a lot of time and trust in that scenario!

What (rough) dollar range are we talking?  I'd have a different expectation for a lower dollar sale than if there was $10k plus still owed on the car.  To me it's always been easier to either pay off the car before selling it or trade it back in. If the seller is looking for top dollar private party sale compared to a dealer trade-in, then they should be willing to either deal with escrow, or find a way to pay off the loan early (personal loan, etc.)

Woody (Forum Supportum)
Woody (Forum Supportum) MegaDork
12/19/21 8:01 p.m.

In reply to dj06482 (Forum Supporter) :


It's enough that I'm not super comfortable with the whole thing. But the price is market correct (not too high or low), and it's spec'd out exactly the way I would like it to be, including the color. The answers to my questions have been sufficient to rule out a scam.

BoxheadTim MegaDork
12/19/21 8:27 p.m.

In reply to dj06482 (Forum Supporter) :

That's why having a bank or CU handle the transaction would probably beneficial. The usual way this is handled is that the buyer basically pays off the loan (so the seller doesn't ride off into the sunset with the money they should've used to pay off the loan) and the seller gets the difference between the loan balance and the sale price.

If you do this at a CU or bank, they'll usually have the other lender send them title directly, and the seller has to sign a bunch of legally binding paperwork that they'll a) allow their lender to release the title to your agent (your bank/CU) and b) has to produce a valid and clear title to the vehicle within a certain timeframe (which only kicks in if their lender effs things up).

There is nothing preventing you from DIYing the process, but my take on something like this is that the lenders have legal departments that deal with this sort of stuff, and financial institutions have an incentive to not screw each other over on paperwork like this because word gets around.

P3PPY Dork
12/19/21 9:06 p.m.

In reply to Woody (Forum Supportum) :

That's a hard one. Scammer he or she may not be, but don't overlook laziness in getting around to resolving what is now *your* problem (getting the title to you). Shoot, some of us are lazy enough about our OWN problems. 

And yes, if dealing directly with financial institutions can do the trick, go for it. It didn't appear to be an option for us. Van was going to be $11k, which is way beyond my comfort level for "I sure hope they send me the title". 

akylekoz SuperDork
12/20/21 7:32 a.m.

I just did this for the first time also.  Our credit union paid handled paying off the other lender and securing the title with release of lien.   Leaving us with a check to give the seller for the balance owed to them and a title to the car.  

Our only issue was unrelated, I planned to pay for the car with HELOC funds but that account got canceled during a refi with another lender.   That's how we ended up at the Credit union for a car loan in the first place.   Then we lost the title in our house somehow and had to meet the seller at the SOS to get a new one.  This all took about ten weeks. 

dj06482 (Forum Supporter)
dj06482 (Forum Supporter) UltraDork
12/20/21 8:17 a.m.
Woody (Forum Supportum) said:

In reply to dj06482 (Forum Supporter) :


That's enough money that I'm not expecting the seller to be able to move some stuff around and pay it off. Also enough that you don't want to be out that money if things go bad. Probably worth going through a credit union or bank to leverage their lawyers and escrow process. Sikorsky CU was great when we used them a few years ago, great rates, great customer service, etc.

porschenut Reader
12/20/21 8:49 a.m.

Not sure what state you are in, but the agency holding the title may be able to do the title transfer paperwork or at least notarise the title transfer. Then  you can walk in with the money and walk out with the legal paperwork in your name.

Woody, who is the lender?  Assuming seller owes less than the purchase price, I would do the following:

1.  Give seller a $500 deposit

2.  Fedex payoff funds to bank holding lien and include a note that the seller also signs saying this vehicle was paid off by you and you are to receive title.  Also include a copy of a bill of sale from seller to you.  They may still mail it to seller, but if you include all of this info they might just send it to you.

3.  Tell seller you will pay any additional balance due upon pickup of vehicle and receipt of title.

You could also complete an "authorization for payoff by a licensed dealer" form and send it along.  While you aren't a dealer, it's the form that dealers use to obtain the titles after payoff on vehicles they buy or take in trade.

I was in the car business for 15 years and now work for a very large local credit union in auto lending.  If I can offer any additional guidance on this please reach out.

docwyte PowerDork
12/20/21 6:16 p.m.

To my knowledge the bank won't send the title to the buyer, only to the seller.  They then still need to sign the title and send it to the buyer.

Cadman5 Reader
12/20/21 6:26 p.m.

Don't pay the seller ANYTHING! Talk to his lender and they will guide you through.

Likely they will want you to send them at least their portion, then they will sign off the title (which they likely have in their possession, or at least are listed as the legal owner). They may even act as a "broker" and collect all of the $$ from you, take theirs, give him the rest, sign-off the title, and send it to you. Although, at some point, they will need re-assurance from the current owner that you buying the car is legit. Not sure how that works with a remote lender.

Tom1200 UltraDork
12/20/21 6:52 p.m.

Title issues and/or hangups are my number one reason for walking away from a deal.

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