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If you’re planning to buy a used car or sell your old vehicle, a car appraisal is a critical part of the process. The appraisal will determine how much the car is worth and give you an idea of how much you may be able to get, or have to pay, for the car.

Here’s a look at your options and resources for a car appraisal.

What Is a Car Appraisal?

New cars come with what is known as the manufacturer suggested retail price, or MSRP. This is the price the automaker suggests that dealers charge for the vehicle. However, cars lose their value through a process known as depreciation, and will require an appraisal to determine their current value at any point in time.

The car appraisal process considers a variety of factors, including the vehicle’s make and model, trim level, mileage, condition, age, and local market conditions.

Who Administers a Vehicle Appraisal?

There are a number of ways to get a car appraised. Some are free, while others come with a fee. Here’s a look at your options.

Self-Appraisal

Whether you’re buying or selling a vehicle, you can use an online valuation tool, such as Kelley Blue Book or Edmunds, to estimate a range in your vehicle’s value at no cost.

You simply input basic information about the car, such as its vehicle identification number (VIN), license plate number, and zip code, in order to get a range of resale values for your area.

As part of the evaluation, these sites will typically pull the vehicle history report to determine whether past accidents affect its value. On average, a minor accident can reduce the value of a car by 10% to 30%, while a severe accident could lower its value by 50% or more.

Car Lenders

If you’re in the market for a used car and getting financing outside of the dealership, the lender will typically send an appraiser to value the vehicle before offering a loan agreement. This is to be sure that the loan amount isn’t higher than the car’s cash value.

With most auto loans, the car you’re purchasing acts as collateral for the loan. If you default on the loan, your lender can seize the vehicle and sell it to recoup its losses. That’s why a car financing company wants to make sure the car’s value and the loan are aligned.

There is typically no cost to you for this service, and you can often use a lender appraisal as a negotiating tool to help you get a better deal on the car.

Dealerships

If you’re trying to sell your car to a dealership or trade it in toward the price of a new vehicle, the dealership will do its own appraisal.

This appraisal will typically involve similar research you have done, as well as an examination of the exterior, interior, mechanics, and overall condition of your vehicle. They may also conduct a test drive before offering a final value.

The dealer’s valuation is not necessarily indicative of the fair market value of the car, however. In fact, it’s often less. The reason is that the dealer needs to turn a profit. This profit will be the difference between what they pay you for the car and what they can sell it for, or the fair market value.

It may be helpful to do some research of your own through valuation websites before you go in for a dealer appraisal. That way, you’ll have a sense of how far off fair market value their offer is and have some negotiating power.

Professionals

If you’re buying or selling a collectible car, or need to value a car as part of a legal proceeding (such as a divorce or bankruptcy proceeding), you may want to turn to an independent professional appraiser.

Professional appraisers have expertise in sales of similar vehicles and will give the car an unbiased examination and appraisal. Unlike the other appraisal methods listed above, this one is not free. A professional appraisal can run at least $100, and often significantly more.

Recommended: What Is a VIN Number?

Factors That Influence Car Appraisals

Many factors can have an impact on the value of a car. Here’s a look at some of the most important.

Mileage

Cars that have higher mileage tend to be worth less due to wear and tear. The more a car gets driven, the more likely it is to experience minor damage or for components to wear out.

According to the Federal Highway Administration, the average annual number of miles a driver puts on a car in the U.S. is 13,476. If you’re driving more than that, the value of your car could take a hit.

Recommended: What Is Car Loan Amortization?

Condition

The condition of your car plays a major role in its value. Scratches and dents on the exterior or damage to the interior can lower its value, as can any components that need replacing, such as worn out brake pads or a slipping transmission.

Car Usage

How a buyer plans to use the car you’re selling will affect its value. As mentioned, a dealer will typically offer a lower appraisal in order to make a profit on reselling the car. A private buyer, on the other hand, might be more likely to agree to the fair market value of a car found on online valuation sites.

Location

Where you’re selling or buying a car will also impact its value. A convertible will likely be in higher demand (and command a higher price) in Los Angeles than in Boston. A pickup truck, on the other hand, might have a higher value in a rural area than in a city.

Recommended: Is Car Interest Tax Deductible?

Is a Car Appraisal Necessary to Refinance Your Car?

No, you typically don’t need to get a formal appraisal to refinance your car. The lender will likely look up the value of your vehicle themselves before approving a new loan.

They’ll also consider your loan-to-value ratio as part of the loan application process. This ratio compares what you owe on the car versus what the car is worth. If you owe less than what the car is worth, you might be able to get a better annual percentage rate (APR). If you owe more than the worth of the car, however, it means you are upside down on the loan.

You may still be able to refinance your car even with an upside-down car loan, though it will depend on your credit profile and how much you owe. Borrowers with good credit can often qualify for up to 120% of the value of the car, while borrowers with bad credit may qualify for around 80% of the car’s value.

Recommended: What Is the Average Car Loan Length?

The Takeaway

Car appraisal is an important step when buying or selling a used vehicle. Whatever side of the deal you are on, it can put you in a better position for negotiation.

Fortunately, there are a number of ways to get a car appraised, including online calculators, lender appraisals, and professional appraisals. Which appraisal option will work best for you will depend on your needs.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What is an appraisal for a car?

A car appraisal gives you an idea of the value of your car based on factors such as its make and model, mileage, condition, accident history, and location.

Do you need to get a car appraisal to refinance your car?

No, you generally don’t need to get a car appraisal to refinance your car, but your lender will likely value your vehicle themselves as part of the underwriting process.

How long does it take to get a car appraisal?

Getting a car appraised using an online valuation tool, like Kelley Blue Book, may only take a few minutes. Getting an appraisal at a dealer, however, could take 30 minutes. A collectible car may take more time to appraise.

Photo credit: iStock/Chong Kee Siong

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOALR-Q325-034

Refinancing the loan on your vehicle can be an important tool in helping you save money. This is especially true if your financial situation has recently improved, as lenders could be willing to offer you a lower interest rate and better terms on a new loan. If you’re a member of the military, you might be able to access even more benefits and protections that aren’t available to the general public.

What Is Car Loan Refinancing?

Cars are big-ticket purchase items, and many people need to use a financing program — be it through a bank, dealership, or another lender — to pay for them. In some cases, the interest rates and terms offered on that initial loan might not be favorable. For example, if an individual has a poor credit score, their lender will likely offer them a loan with a higher interest rate.

Later, if that person has built their credit, they may be able to refinance their loan with another lender. The process of refinancing involves taking out a new loan to pay off the old one. Ideally, the new loan offers good interest rates or terms that help the individual save money in the long run. For example, a shorter loan term or lower interest rate can save an individual money over time.

Before taking out a new loan, consider both the positive and negative sides of auto loan refinancing.

Recommended: Guaranteed Auto Refinance

How Does Military Auto Refinancing Differ?

You may be eligible for special lender discounts if you’re an enlisted service member who qualifies for auto loan refinancing. That means you may receive interest rate discounts not available to a civilian if your military car refinance application gets approved.

A refinance car loan military product functions no differently than similar products for civilians. Banks, credit unions, and other financial institutions can set terms and conditions for lending products. A military auto loan refinance is a traditional auto refinancing product that may provide you with special terms.

The U.S. Department of Veterans Affairs does not offer VA refinance car loans, but private lenders may offer special military car refinance rates to current and former service members. Special discounts aside, the refinancing process itself is basically the same for military and non-military members.

Essentially, you’re taking out a new loan. In most cases, you’ll fill out a loan application and lenders will take a look at financial information like your credit score and history to determine the interest rate and terms they’re willing to offer. Generally speaking, the better your credit score, the better the interest rates you’ll be offered and the more favorable the loan terms will be.

Lenders will also take a look at the make, model, and condition of your vehicle to make loan decisions. For example, if your car is worth significantly less than what you already owe on your previous loan — a situation known as an upside down auto loan — you may have a difficult time securing a new loan. Also, it’s typically easier to secure a refinance loan on newer vehicles. So if you’re thinking about refinancing, it may be better to do it sooner rather than later.

If your credit rating is low and you’re having trouble securing a loan, you’ll have options. For example, you may seek out an auto loan cosigner with a stronger credit history. Beware that this person will be on the hook financially if you fail to make payments.

Benefits of Refinancing an Auto Loan in the Military

When it comes to your car, be aware of the advantages you can get if you are in the military: caps on auto loan interest, discounts on insurance, access to some credit unions’ advantageous rates, protection from repossession, and even price slashing on the new car purchase price for certain brands. These things come into play with an auto refinance loan for the military.

As mentioned above, you may be eligible for special lender discounts if you’re an enlisted service member who qualifies for military car refinance loan products. The VA does not offer VA refinance car loans, but private lenders may offer special military car refinance rates to current and former service members.

The benefits of refinancing an auto loan in the military is you may enjoy certain protections and rate discounts not available to a civilian who never served in the U.S. armed forces. Refinance auto loan military products are traditional auto refinancing products that may provide service members with special terms.

Recommended: Cash Out Auto Refinance

Military Auto Loan Refinance Criteria

Qualifying for a military refinance auto loan may require that you meet the following car loan requirements:

•  Proof of identity

•  Proof of income

•  Proof of residence

•  Valid vehicle documentation

•  Proof of insurance

Refinance Auto Loan With Bad Credit for Military Members

If you have a poor credit score, it’s doubly important to familiarize yourself with the breaks that being in the armed services provide for a military refinance auto loan. You have access to deals and discounts that civilians don’t, like favorable credit union loans for military personnel.

Having bad credit is not ideal, but it’s also no reason to panic. It’s possible to get car loans and refinance with bad credit.

Obstacles With Car Registration for Military Members

People in the military don’t often stay in one place. Your refinance lender will almost certainly ask to see your car registration when you apply for a refinance loan. When you move, states typically require registration to be updated with their department of motor vehicles (DMV). Rules will vary by state, and some will even waive registration fees for military members.

Most states will require proof of insurance when registering your vehicle, and the address on insurance documents will often need to match registration documents. For military members who move frequently, these steps may be overlooked. However, it’s important to get them squared away before applying for a military refinance auto loan.

Recommended: Settle a Charge Off Auto Loan

Military Auto Refinance Considerations

When it comes to purchase car insurance, or seek financing, there are some important benefits military members need to know:

Interest Rate Protection

The Servicemembers Civil Relief Act (SCRA) puts a 6% cap on loans that military members took out prior to joining the service. Creditors must retroactively forgive interest that is greater than 6% per year, and they cannot accelerate principal payments as a result of a request for a 6% cap. This cap not only applies to auto loans, it also applies to credit cards, mortgages, home equity loans, student loans, and other vehicle loans.

Be aware that any loans, including refinance loans that you take out while on active duty, will not be subject to the same interest rate cap protections.

Car Repossession

The SCRA also provides protection against car repossession. According to the law, lenders cannot repossess your car while you’re in military service without a court order. Even if the creditor does take their claim to court, they could face other hurdles.

For example, SCRA rules may require the lender to return some or all of the payment you made prior to repossession. Or they may require an equity payment equal to the difference between how much you still owe on your auto loan and the value of the car.

Military Financing

Members of the military may have access to credit union auto loans and military bank auto loans that traditional lenders don’t offer. For example, the Navy Federal Credit Union (NFCU) was established specifically to help members of the armed services access loans with affordable rates and terms military personnel could manage.

It’s worth checking with the NFCU and other lenders like the Pentagon Federal Credit Union to see what types of loans they offer. Because these organizations are used to working with military personnel, they are familiar with your special needs.

Discounts on Cars for Military Members

Many automakers offer special pricing deals for military members. As you’re shopping for a new car, you may want to take these brands into consideration to help you save:

•  Acura

•  BMW

•  Ford

•  General Motors

•  Honda

•  Hyundai

•  Mitsubishi

•  Nissan

•  Subaru

•  Toyota

If you are stationed overseas, there may still be opportunities for you to purchase a vehicle at a discount. Volvo and BMW offer military benefits abroad. You may also consider services like Military Autosource, which can deliver a vehicle while you’re serving outside the country.

Car Insurance Discounts

Monthly auto loan payments are not the only recurring expense related to car ownership. Keeping your car insured is another, and it can get pricey. Luckily, many insurance providers also offer car insurance discounts to active military members and veterans.

Recommended: Cheapest Car Insurance Companies: Find the Cheap Car Insurance for You

Can You Get Out of a Car Loan With Military Orders?

If you receive military orders to move, you’ll still be on the hook for your car loan. That’s generally how car loans work: you’re responsible for repaying the debt. That said, if you have leased a vehicle, you might be able to terminate the contract under certain circumstances prescribed by the SCRA. In order to break your lease, one of the following must be true:

•  You must have entered into the lease agreement prior to active duty, and then you must have been called to active duty for 180 days or longer.

•  During active duty, you received orders for a permanent change of station from inside the continental U.S. to outside the continental U.S. The same is true if you received an order to move from outside the continental U.S. to anywhere else.

The Takeaway

If your auto loan has become unmanageable, if interest rates have changed, or if your financial situation has improved, it may be time to look into auto refinance rates. If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Does being in the military help with student loans?

Being in the military can help with car loans through benefits like lower interest rates, military discounts, and programs under the Servicemembers Civil Relief Act (SCRA). These benefits protect active-duty members from high interest rates and provide financial flexibility, making car ownership more affordable during and after service.

What are the benefits of auto loan refinance loans for military members?

If you’ve built your credit or you get into a stronger position financially, you may find a better loan through a military auto refinance. Auto refinance loans for military members often include benefits like lower interest rates, reduced fees, and flexible repayment terms tailored for active-duty personnel. Programs like the Servicemembers Civil Relief Act (SCRA) cap interest rates and offer protections, making refinancing a cost-effective option for managing car loan payments and financial stability.

Can you get out of a car loan with military orders?

Military members can terminate a car lease early without penalties under the Servicemembers Civil Relief Act (SCRA) if they receive qualifying military orders. However, getting out of a car loan may require selling the vehicle or refinancing, as the SCRA protections primarily apply to leases, not traditional loans.

Photo credit: iStock/gehringj

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-031

Yes, you can get an auto loan or auto loan refinance after bankruptcy, though it may be more challenging. While filing for bankruptcy may be the best decision for people in certain circumstances, it does come with long-term consequences. Both your finances and your credit score are likely to suffer.

Whether you’re just starting or are in the recovery process, it is best to learn about the options surrounding how to get an auto loan after bankruptcy.

Chapter 7 vs. Chapter 13 Bankruptcy

The type of bankruptcy you undertake can have a big effect on how your existing car is handled. Some people hesitate between debt settlement vs. bankruptcy. Once you’ve chosen bankruptcy, it’s important to pick the right kind.

How Chapter 7 Works

Chapter 7 bankruptcy, also called liquidation bankruptcy, poses the most risk to your vehicle because it involves liquidating your assets to pay your creditors.

Basically, to be eligible for a Chapter 7 bankruptcy, you must show that you can’t reasonably pay off your debts with your disposable income. At that point, your nonexempt property (which might include bank accounts, valuable jewelry, or a second car, among other things) may be sold to pay off your debts, though you will be allowed to keep certain necessities, which are classified as “exempt.” In some cases, you may be able to get an exemption to keep your car if you have some equity in it. Exemption rules vary by state.

How Chapter 13 Works

Chapter 13 is a reorganizing plan that lets you keep your car (and your house), but you’ll be on a court-ordered repayment plan for three to five years. To be eligible for Chapter 13 (also called a reorganization bankruptcy), you must have a regular income and you can’t owe more than a certain amount of debt (as of 2024, the limit is $465,275 in unsecured debt or $1,395,875 in secured debt).

No matter which option you choose, it’s advisable to speak with an attorney and get your questions answered about what to do before declaring bankruptcy.

Recommended: Refinance a Car After Divorce

How Does Bankruptcy Affect an Auto Loan?

You may be wondering how long after bankruptcy can you buy a car. Another question is what to do if you have a car, and a car loan, while you go through bankruptcy.

With a Chapter 7 bankruptcy, if you have a car loan (or your equity is considered nonexempt), then you have a few options. Because the loan is secured by the vehicle, you’ll need to keep up with your payments in order to keep the car. You may need to sign a reaffirmation agreement and outline your plan for affording the monthly payments.

Otherwise, you can either surrender the car or redeem it when you’re in Chapter 7. By surrendering, you remove your liability for the debt, but the car will be repossessed by your creditor. By redeeming your car, you agree to pay a lump sum of the car’s market value rather than the remaining loan amount — and you get to keep the car.

In a Chapter 13 bankruptcy, the court will appoint a trustee and you’ll make monthly payments as determined by the court’s payment plan to the trustee, who will make payments to your creditors. You can add your car loan to the repayment plan. This could give you a chance to catch up on any payments you may have missed leading up to your bankruptcy.

Bear in mind that if you decide to buy a car while you’re in a Chapter 13 bankruptcy, you will need to get the court’s permission.

Car Loans vs. Liens

A loan is not the same thing as a lien. If you are taking out a loan to purchase a car, a lender wants to make sure they are protected if you default. In order for them to receive that protection, they use car liens. The car you purchase has a lien on the title until you’ve completely paid off the car.

Considerations With Auto Loans After Bankruptcy

A major issue with a bankruptcy car loan is your credit score.

A chapter 7 bankruptcy stays on your credit report for 10 years, and a chapter 13 stays on it for seven years (since, in the latter case, you partially repay some of your debt).

Once the bankruptcy hits your credit report, your credit score could drop. Someone with a 680 score could lose between 130 and 150 points, while a person with a score of 780 might see their score drop between 200 and 240 points, depending on a number of variables, including your credit score prior to filing and how many accounts were included in the bankruptcy.

Can You Get a Car Loan During Bankruptcy?

Getting a car loan after bankruptcy can come with challenges beyond the impact to your credit score. Lenders generally view applicants with a bankruptcy as high-risk because there’s a history of non-payment to other creditors.

While there are lenders who focus on subprime borrowers, expect extremely high interest rates to compensate for the risk.

Pre-planning to Get Approved for a Car Loan After Bankruptcy

You can prepare yourself for applying for auto loans after bankruptcy in a number of ways.

4 Ideas That Could Help With Car Loan Approval After Bankruptcy

Here are four ideas to help your cause:

1. Rebuilding Credit First

One possible route is to start working to rebuild your credit as soon as possible.

Banks typically require a minimum credit score of 600 to give an auto loan without any down payment. However, it’s possible to buy a car with credit in the 500s — be aware the interest rate will most likely be high.

2. Finding a Cosigner

You could consider getting a cosigner with good credit, if possible. This does mean that your cosigner shares equal responsibility for the loan, but you’ll likely have better odds of getting approved.

3. Finding a Cheaper Car

It’s a good idea to keep your potential auto loan as low as possible. In addition to saving up for a sizable down payment, consider focusing on lower-priced vehicles as one way to potentially improve your chances of getting approved.

4. Wait and Save

Another strategy that may help you get approved for a car loan after bankruptcy is to save up for a large down payment. This lowers the lender’s risk and might therefore help lower your interest rate and your monthly payment.

Where to Find Auto Loans After Bankruptcy

There are many potential sources for after-bankruptcy auto loans. Comparing multiple auto loans after bankruptcy can help ensure that you’re getting the best deal possible for your financial situation. Lenders’ rates and terms can vary significantly, so take the time to shop around.

A local bank or credit union may have more flexible lending requirements to help you qualify, especially if you have a relationship with it already.

Beware of predatory lenders with exorbitant fees and interest rates. Financing companies that advertise “no credit check,” “guaranteed financing” and “buy here, pay here” are to be approached with caution.

Alternative to Auto Loan Bankruptcy

Voluntary Repossession

Surrendering your car is an option for a car loan in a Chapter 7 bankruptcy. Voluntary repossession is a course of action. If you surrender your car, your creditor will repossess the vehicle and the car loan balance, and any deficiency balance will be erased as part of your bankruptcy discharge.

Can You Refinance Your Car After Bankruptcy?

A bankruptcy can impact your ability to refinance an existing car loan just as it can affect taking out a new one since your credit history is a primary factor in both applications. That doesn’t mean it’s impossible to get approval for after bankruptcy car loans. And you may still be able to save on your interest rate.

Figuring out how to refinance an auto loan after bankruptcy involves many of the same challenges as buying a new car. Compare offers from online lenders and local financial institutions to find the best deal for you.

Refinancing a car can cost money, typically in the form of lender fees and title fees. While the amounts may not be huge (especially if you’re saving on interest), they can add up, especially if you try to refinance your car loan multiple times.

The Takeaway

It may be harder to get an auto loan after bankruptcy, but it doesn’t have to be impossible. And the process itself isn’t all that different from the one you would use if you hadn’t gone through a bankruptcy. Consider budgeting not only for a down payment, but also to look longer and harder for an acceptable interest rate. Use an auto loan calculator to see specifics.

Comparing auto loan refinancing rates after bankruptcy can help improve your odds of getting approved and help you find the best offer. You can use Lantern by SoFi to access multiple lender offers at once.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Can you get approved for an auto loan after applying for bankruptcy?

Yes, but typically the more time has passed since your bankruptcy, the better. This gives you time to work on rebuilding your credit, which can eventually help you get approved for more favorable terms. Additionally, the impact of bankruptcy on your credit score usually lessens over time with responsible financial decisions, even if it’s still listed on your report.

What do you need to do to qualify for an auto loan after bankruptcy?

A larger down payment can help you qualify for a car loan after bankruptcy. It may also be helpful to apply with a co-signer with a good credit score.

How hard is it to be approved for an auto loan after bankruptcy?

It can be difficult to get approved for an auto loan after bankruptcy, but not impossible. Look for lenders that specialize in working with borrowers who have a bankruptcy on their credit report. You can search online and also check with local banks and credit unions.

Should you refinance a car after bankruptcy?

Refinancing your car loan only makes sense if it will save you money in interest or help you afford the monthly payments to avoid default. When searching for refinance offers, evaluate the interest rate and fees, as well as the length of the term. A lower rate saves you money over the life of the loan, while a longer term lowers your monthly payment (although costs you more in interest over time).

Photo credit: iStock/Thai Noipho

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOALR-Q325-021

You can sell a car with a lien on it, though you may have to go through some extra steps, especially if you want to get the best deal. Selling a car can be a bit of a procedure under any circumstances, but it’s a bit more complicated if your car is still under lien (which is to say, if you still owe money on it).

Here’s everything you need to know about how to sell a car you haven’t paid off.

Can I Sell My Car if It Has a Lien?

Selling a car with a lien is possible, and one of the simplest ways to sell a car with a lien is to sell it to a dealership. A dealership is typically able to pay off your lienholder and handle the necessary title transfer to reflect the change of ownership.

Can you sell a car with a lien if you’re also carrying an upside down car loan? Yes, even if your outstanding loan balance is greater than the resale value of your car. To pull off this transaction, the buyer may ask that you pay the difference to eliminate your negative equity in the vehicle.

What Is a Car Lien?

A car lien is when you take out a car loan in which the lienholder, usually a bank, holds the title of your car as you pay off the amount you owe on it. This is considered a secured auto loan, since the bank may repossess your car if you fail to pay up.

In other words, a car lien gives the lienholder a safeguard in case you don’t pay. Once you do pay off your car loan, the lienholder will usually send a lien release document transferring the car title to you. A car lien functions as a security interest — it gives the lienholder the right to repossess your vehicle if you default and fail to repay the loan.

The way car loans work is a borrower buys a new or used vehicle with auto financing and agrees to repay the debt over time. Secured auto loan lenders may place a lien on your vehicle as part of the financing terms and conditions.

Keep in mind that a lien or car loan differs from a car lease. With a loan, at the end of the term, you own the car; with a lease, at the end of the term, you don’t. You’re simply paying for the privilege to drive it around.

Recommended: Determining a Car’s Value With a Salvage Title

Can You Sell a Car With a Lien on It?

As stated above, you can sell a car with a lien on it, but the active lien can make the transaction process a bit more complicated. That’s because if your car is still under lien, the lender, or lienholder, is still holding onto the title in case you fail to pay.

The loan needs to be paid in full in order for the title to be transferred. That means you’ll need to get enough money to pay for the loan entirely before you can officially sell the car to someone else.

The difficulty of this can vary depending on whether you’re hoping to sell your car to a dealership or on the private market. Selling a car to a dealership may be easier, but you’re likely to get less money for your car than you would with a private buyer.

Recommended: Why Are Loans Secured With Collateral?

5 Ways to Sell a Car With a Lien

If you have a loan balance on your car, the first thing you need to do in order to sell it is to determine the payoff quote, which isn’t the same as the balance you see reflected on your account. The payoff quote is usually higher than the account balance, because the lender has to factor in interest that’s been accrued since you last paid your auto loan; interest builds up every day.

Your payoff quote will be good for a set and limited amount of time, so be sure to pull it when you’re actually ready to sell your car, and not earlier. Additionally, you may want to revisit your payoff quote throughout the sales process to ensure your pricing is high enough to cover the amount — and remember, you’ll need to continue making your regular monthly payments in the meantime.

Here are five ways how to sell a car with a lien:

1. Sell to a Dealership

Once you have your payoff quote, things start to diverge depending on how you’re planning to sell the car. If you’re hoping to sell it to a dealership, matters might be a little simpler. Often a dealership is equipped to pay off the loan in full and handle the title transfer on its own.

However, this only works if the trade-in value of your vehicle is as much as, or higher than, the amount you owe. If you owe more than the car is worth — sometimes known as being upside down on a car loan — you’ll be required to pay the difference out of your own pocket.

2. Pay Off the Loan Before Selling

When exploring how to sell a vehicle with a lien, you may pay your car loan off early before selling it. Paying the auto loan off in full will give you full ownership of the vehicle. This can open the door to you selling your car without a lien.

3. The Buyer Pays Your Loan Off

A private buyer can pay your car loan off as part of the process of buying your car. This may not be as simple as selling to a dealership, but arranging for the buyer to pay off your car loan is another way you can sell a vehicle with a lien.

Selling to a private buyer can be a lot more lucrative than selling at the dealership. In many cases, a lienholder may accept a check directly from the buyer, especially if you’re able to go to a physical office together and explain the situation in person.

However, if you’re hoping to do more than just break even on the deal by having your buyer pay off the lien, you’ll need to arrange this with the buyer ahead of time as well, so they’ll know that some of the money is going directly to you and some is going to the lienholder.

Private party auto loans can provide consumers with financing to buy used vehicles from private sellers rather than dealerships. Banks, credit unions, or nonbank financial institutions may offer these loans.

4. Sell Through an Escrow

Another option for how to sell a car you haven’t paid off is to set up an escrow account, which will hold the buyer’s money until the loan is paid off and the title of the vehicle is transferred. An escrow account is a great way to ensure security on both sides, but setting one up does incur fees — which is another factor you and the buyer will have to negotiate on.

5. Sell at the Lender’s Office

When exploring how to sell a car with a lien, you may consider selling your vehicle to an interested buyer at the lienholder’s office. This may be the fastest way for you to pay off the auto loan and sell the vehicle.

Your lender or lienholder may have no security interest in the vehicle once you’ve repaid the auto loan debt in full. You can make arrangements at the lender’s office to satisfy the debt and sell the vehicle to an interested buyer who would become the owner of the used car. The title can be transferred into the buyer’s name once the auto loan is fully paid off.

How to Avoid Selling a Car With a Lien

While it’s possible to sell a car with a lien on it, if you’d rather not, here are some options to try:

Communicate With the Lienholder

Your lienholder is the party who is listed on the title of your car until it’s paid off, so if you’re hoping to sell it, keeping an open line of communication with them is a great first step. You may be able to work out something with the loan terms to help you pay off the car before you go through with the sale transaction.

There are different types of car titles, including the following:

•  Clean title: A clean title on a vehicle suggests that the vehicle doesn’t have a history of sustaining major damage. A rebuilt car may not have a clean title if the vehicle previously sustained major damage from a crash, fire, or flood.

•  Clear title: This is a title that has no lienholder on it. Having a clear title on your car means you are the sole owner of the vehicle with 100% equity in the car. It also means no other party has a security interest in your vehicle.

•  Lien title: As the name implies, a lien title has the lienholder’s name on it. Your lienholder may have possession of the title until you pay off your car loan.

Refinance the Car

If paying off the loan in its current form just isn’t a possibility for you, it may be worth looking into whether or not auto refinancing could help lower your car payment. You may pay more interest over the life of the loan if you refinance with an extended term.

Refinancing a car involves taking out a new loan, with different terms, that pays off the old loan — and which often spells lower monthly payments or less overall interest for you. Of course, there are many things to consider when refinancing a vehicle, such as your creditworthiness, the impact the refinance might have on your credit score, and details about the vehicle itself.

It can be more difficult to refinance a car with high mileage than a new one with less road time.

That said, refinancing can mean big savings and may make it easier for you to pay off the loan more quickly, so it’s worth looking into at the very least. Under certain circumstances, you may even be able to refinance your vehicle through the same lender, especially if your financial situation has significantly changed.

The Takeaway

While selling a car with a lien is possible, it can be a little trickier than selling a car you’ve already paid off. The level of effort you’ll need to extend may depend on whether you’re selling to a dealership or on the private market.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Can you sell a car with a lien?

Yes, you can sell a car with a lien. One way you can do this is by going to a dealership and offering to sell your vehicle. Often a dealership is equipped to pay off the loan in full and handle the title transfer on its own. Selling a car with a lien may not be right for you if you have an upside down auto loan. A car loan is considered upside down or underwater if the outstanding loan balance is greater than the appraised value of the car.

What is a lien release letter?

A lien release letter is a document from a lienholder indicating that the lienholder has no current security interest in the vehicle. A lienholder may deliver a lien release letter if and when a borrower pays off the auto loan in full.

Is it illegal to sell a car with a lien on it?

No, it’s not illegal to sell a car with a lien on it if appropriate steps are taken. If you’re selling a car with a lien, either you or the buyer may need to pay off the car loan in full. Any party can pay off the car loan as part of the process of selling a car with a lien on it. The title can be transferred into the buyer’s name once the auto loan is fully paid off.

Photo credit: iStock/Tony Studio

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-013

A fair credit score of 650 generally seems to be sufficient for getting a new or used car loan. Consumers with a 650 credit score are classified as near prime or nonprime. You might not qualify for the best annual percentage rates (APRs) with a 650 credit score, but you may qualify for auto loan refinancing.

Auto refinancing pays off your original car loan and replaces it with new lending terms. Refinancing may be right for you if you need a lower monthly payment or lower interest costs over the life of your loan. (You may pay more interest over the life of the loan if you refinance with an extended term.)

Below we highlight how lenders may view a 650 credit score for a car loan.

Is It Possible To Get a Car Loan With a 650 Credit Score?

Getting a car loan with a 650 credit score is possible and not unusual for consumers with fair credit.

A credit score according to the major credit scoring models, including VantageScore® 4.0 and base FICO® Scores, can range from 300 to 850. A 650 credit score can be considered near prime, nonprime, and fair. It’s possible to get a car loan with a 650 credit score, but most car loan borrowers had a “good” credit score, which would mean it was above 660.

Recommended: Does Refinancing a Car Hurt Your Credit?

What Is a 650 Credit Score?

A 650 credit score is generally fair and nonprime, as the table below shows:

How Do Lenders View a 650 Credit Score for a Car Loan?

Lenders may view a 650 credit score as creditworthy but not necessarily worthy of the best terms and conditions for a car loan. Borrowers with a 650 credit score may pay higher finance charges on a car loan than borrowers with prime or super prime credit scores.

Lenders may view a 650 credit score as being near prime, which is generally good enough for borrowers to qualify for financing.

650 Credit Score Auto Loan Interest Rates

As a consumer, you may wonder whether and when to finance an auto loan. Refinancing might be right for you if you can secure a lower interest rate or if you need a lower monthly payment.

Recommended: Refinancing a Car Loan With the Same Lender

650 Credit Score Car Loan Terms

The near-prime credit risk category includes consumers with a credit score at or near 650. Car loan terms can range from one year to more than 85 months, including 144-month car loans. Longer terms may include higher interest rates and lower monthly payments compared with shorter terms.

Factors That Affect Auto Refinancing Approval

Here are some factors that can impact auto refinancing approval:

Credit Score

Lenders of auto refinance loans may consider the credit score of the borrower when determining whether or not to approve a loan refinancing request. Some borrowers with bad credit may not qualify. There’s also a cost to refinance a car, and applying for auto refinancing can hurt your credit score if the lender conducts a hard inquiry credit pull.

Debt-to-income Ratio

Banks, credit unions, and nonbank financial institutions generally like to see a debt-to-income ratio below 36%. Borrowers with high DTIs may have a harder time getting approved for auto loan refinancing than borrowers with low DTIs. That’s because DTI ratios help lenders evaluate an applicant’s ability to manage existing debt and future loan payments.

Income

Lenders generally require borrowers to have a steady income to qualify for auto loan refinancing. Borrowers with an annual income below $18,000 may have difficulty getting approved.

650 Credit Score Car Loan Repayment Schedule

Consumers with a 650 credit score may qualify for auto loan terms ranging from a few years to more than 85 months.

Term length and APR can affect your loan repayment schedule in terms of how much you pay each month. For example, an 8.99% APR car loan of $37K with a five-year term would feature 60 fixed monthly payments of $767.88. Borrowers are expected to make on-time payments over the life of the loan.

Applying for a 650 Credit Score Car Loan

Consumers with fair credit scores can apply for car loan financing through banks, credit unions, nonbank financial institutions, or dealerships. A consumer with a 650 credit score may qualify for auto loan financing, but nonprime consumers usually don’t qualify for the best rates.

You can explore auto refinancing for a lower APR, although you may pay more interest over the life of the loan if you refinance with an extended term. How soon can you refinance an auto loan?

You may have the option to refinance almost immediately.

Recommended: Car Payment With a Credit Card

The Takeaway

A 650 credit score is better than subprime, but it’s still below the general threshold of good credit. Borrowers with fair credit scores may have access to near-prime car loans.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What is a good APR for a car with a 650 credit score?

A good APR is subjective. For a car loan, it’s one that’s better than the industry average.

Can you get a $40,000 car loan with a 650 credit score?

Yes, some lenders may offer $40,000 in auto loan financing to borrowers with fair credit scores of 650. The interest rates might not be as attractive as they would be with a good or excellent score.

Can you finance a car with a 640 credit score?

Yes, certain lenders may offer new and used car loan financing to borrowers with fair or bad credit.

Can I refinance my car loan with a credit score of 650?

Yes, you can refinance your auto loan with a credit score of 650. If borrowers with deep subprime credit scores can access used car financing, it’s clear that other borrowers with a 650 credit score can refinance auto loan debt.

Photo credit: iStock/Goran13

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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