How to Sell a Car With an Owner Finance Contract

by Lee Nichols

    If you don't need a lump-sum payment when selling your old car, offering owner financing might make it sell more quickly and bring in more money. A large determent for someone who is considering buying a car from a private seller is the ability to find financing. Providing the financing yourself eliminates this problem and, if done correctly, protects you from potential loss.

    Your car might bring a higher price if you take time to prepare it. Make any necessary repairs to ensure the vehicle's safety and detail it inside and out. Remove stains from upholstery and carpet and wipe down any leather or vinyl with a protectant. Make copies of any maintenance records and place them in a file to give to the new owner when he signs the financing agreement.

    Kelley Blue Book provides vehicle valuations based on the make, model, mileage, amenities and condition of your vehicle. You can use the website to determine the price to set for your vehicle. Set a slightly higher price than you are willing to take to leave some room for negotiation with the buyer.

    Place a classified ad in your local paper and put notices about the vehicle up on bulletin boards to alert potential buyers that you have a car for sale. Describe the car as accurately as possible, and make sure to state that you are willing to provide financing for the purchase. As long as you do not sell more than six cars a year, most states allow you to sell a car "As Is," which protects you if the car breaks down after purchase.

    Use a loan agreement template to help you write the contract between you and the buyer. Talk with an attorney about the laws in your state concerning selling a used car and interest rates to make sure that your contract is legal in your state. Make sure your description of the vehicle includes the vehicle identification number and the details of the loan. Include any reasons that will void the contract, such as nonpayment.

    Have the buyer supply you with a credit report or give you permission to check his credit. You cannot check his credit without having written authorization to do so. Since the three major credit bureaus, TransUnion, Experian and Equifax, all receive credit information from different sources, you should get a report from each company before completing the sale. Confirm the buyer's employment and call any provided references to confirm that the buyer is able to pay for the car.

    Both of you must sign the contract and, if you are not signing in front of a notary, sign it in front of witnesses. Ask the buyer to call his insurance agent and ask for proof of insurance showing you as the lien holder. Accept the down payment and remove your license plate before the buyer leaves with the car. Take the title to your local Department of Motor Vehicles to get a new title showing you as the lien holder.

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