A Complete Guide to Sell a Financed Car
The decision to sell your used car which has still a loan on it is a little bit tricky and different from the usual selling decision. In normal conditions only the buyer and seller are involved in the deal; however, when you decide to sell a financed car with a pending loan on it, a third party in the form of financing agency also comes into the picture. This inclusion takes things to another level and now as a seller, you have to satisfy not only concerns of the prospective buyer but also need to take financing agency into confidence while starting the selling procedure.
That said you need not panic as the process of selling a financed car is not that complicated. Yes, you have to undertake some extra steps which might stretch the selling process a bit but in the end of the day, it’s completely doable. Go through this article and at the end, we’re sure you find that selling a financed car is not all that difficult that you initially assumed it to be.
1. Start with Basics: You can’t sell your car legally until you receive a No Objection Certificate (NOC) from the financing agency. This certificate is required in order to remove the hypothecation from the registration certificate (RC) of your car. Once the hypothecation is removed, then only you become eligible to sell your car.
One important thing you need to remember that every type of loan comes with a fixed repayment period which is also known as the lock-in period. In other words, you have to pay a minimum number of requisite EMIs. Now, if you clear outstanding amount before the lock-in period is over, your bank will levy an extra charge (financial penalty) for this early payment. Therefore, when you decide to sell your car make sure you keep this aspect in your mind before proceeding ahead with the process.
2. What is hypothecation and how to remove it? The term hypothecation means that you have pledged some form of collateral for getting the loan from a bank or a financial institution. In case of a car loan, the car itself becomes collateral and the name of the entity from which the loan has been taken is hypothecated on the RC. It’s only when you pay off the loan and get the NOC from financing agency, you can apply for the removal of hypothecation from the RC at the Regional Transport Office (RTO).
For that you need to submit two copies of form 35 along with original RC, original NOC certificate, attested photocopy of your pan card, attested photocopy of valid insurance and pollution under control certificate, and attested photocopy of residential proof to the RTO with requisite fee to process your application. The time taken to remove the hypothecation varies though on average, it will take around 3 to 4 weeks and sometimes even more than a month to complete this process. Only once the hypothecation is removed from the RC, you become the sole legal owner of the car and can sell your car without any restriction.
3. Do the Analysis: Get the estimate of the amount you have to pay to the bank for the early payment of your loan and then compare the total cost with the value that you are expecting from the sale of your used car. If you find that the cost exceeds the value then it is a wise decision to put the sales process on hold. However, if you find you can still make a decent profit even after including the cost of early repayment then it makes sense to go ahead with the deal. Also, take into consideration extra days required to remove the hypothecation from the RC while you discuss the selling plan with the prospective buyer.
4. Can I ask the Buyer to Pay Directly to Bank? Yes, you can also persuade the prospective buyer to pay directly to the bank as it will help the process to be more swift and fast. The buyer shouldn’t have any problem to pay on your behalf as long as the value of the deal is equal to or less than the outstanding amount you have to pay to your bank. However, if the outstanding amount exceeds the deal price then you have to pay the rest of the money to the financing agency. It also depends upon the kind of understanding you have been able to develop with the prospective buyer and if the tuning is on the right note, many of these issues can be sorted out easily.
5. Honesty is the Best Policy: Do not hide away any fact from either the prospective buyer or the financing agency. Be open in your communication and put all the relevant facts and figures on the table even if they seem to have a negative impact on the proceedings of the deal. Remember, the prospective buyers could potentially sue you for concealment of facts and forgery even after the deal if he/she gets some information that you didn’t reveal during the proceedings. Hence, it is in favor of each and every stakeholder involved in the process to be transparent and true to the spirit of honesty and integrity during the process.
Advantage of selling to CarDekho Gaadi
If you are planning to sell your financed car then there is no better place than a CarDekho Gaadi Store. We are operating in the automotive industry for more than a decade now and buy all kinds of cars including the ones having outstanding loans. We assure you to provide the best value for your used car and all the hassle related to the paperwork and RC transfer will be on us. Contact us at 1800-12345-2323 or drop up an email at email@example.com to experience an unmatched and seamless car selling experience.
Also Read:- Documents Needed to Sell Your Car