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Will Carmax Buy a Car with a Loan? Here’s what you need to know

Has your family grown since you bought your car? Do you need something more fuel-efficient? Do you simply want to upgrade to something featuring newer technology? Whatever the reason, selling your vehicle is easy with Carmax.

They are well known for buying or making an offer on almost any vehicle, but will Carmax buy a car with a loan on it?

Carmax will buy a currently financed vehicle. If the quote is higher than what is owed, Carmax will pay the difference to the seller. However, if the quote is lower than what is owed, the seller must pay the difference at the time of the sale.

Continue reading to learn more about selling a currently financed vehicle, as well as the process of doing so with Carmax.

Used car sales lot

What Is Negative Equity?

If you are trying to sell a vehicle with a current auto loan on it, you may have heard the term negative equity being tossed around, but what is negative equity?

Simply put, having negative equity means that you owe more for the vehicle than the vehicle is estimated to be worth. For example, let’s say that you have an auto loan that you still owe $6,000 for, but your car is only valued at $4,000; you would have negative equity of $2,000.

Since vehicles begin to depreciate as soon as you drive them off the showroom floor, it is common for people to have negative equity, and most people pay their loans without ever realizing it. However, it may affect insurance payments and become a factor when trying to sell the car.

What is Positive Equity?

Positive equity is a term that is not heard quite as much. It is the exact opposite of negative equity and is more commonly referred to as “profit.”

Let’s say that you have that same auto loan, and you still owe $6,000 on it. However, instead of the car being valued at $4,000, it is valued at $8,000. In this scenario, you would have positive equity of $2,000. If you sold the car, you would make a profit.

Having positive equity is ideal because if you were to get into an accident, the insurance payment would exceed the value of the car. Furthermore, if you wanted to sell/trade the vehicle, you would not owe money and would have extra to put towards a new vehicle.

Can You Sell a Vehicle with Negative Equity?

Yes. You can sell a vehicle that has negative equity. In fact, there are multiple ways in which you can go about doing this. This content is owned by moc.sotuaytsur. However, since selling a car with negative equity can become quite expensive, it is sometimes a better idea to hold off until you are no longer upside down in your loan. Still, if you cannot wait, you can sell a vehicle with a loan in one of the ways briefly described below.

Paying the Difference

Most dealerships will take financed vehicles as a trade-in. However, the individual trading the vehicle is responsible for paying the difference between what the dealership quoted for a trade-in value and what is still owed on the car.

For example, going back to the scenario where you still owe $6,000 on an auto loan, if the dealership were willing to give you a trade-in value of $3,000, you would have to produce the other $3,000 all at once.

The biggest downfall to this method is that dealers often quote a trade-in value that is well below the car’s actual estimated value to leave room for them to make a profit reselling the car. So, not only are you paying out of pocket all at once, but you end up with even more negative equity.

Rolling the Difference into a New Loan

Another choice extended by dealerships is the ability to roll negative equity into a new auto loan. For example, instead of paying the $3,000 owed in the scenario above, you would roll it into the new car loan.

However, again, because dealers often quote lower trade-in prices, you end up with more negative equity than you would have otherwise had. Furthermore, adding the extra amount guarantees that you start your new loan with negative equity. If you continue to do this, you will end up in a vicious cycle of always being caught in an upside-down loan.

Selling the Vehicle Privately

People often do not realize that it is possible to sell a vehicle privately, even if that vehicle is still financed through a financial institution. Although some institutions may place restrictions on this or charge a fee when the loan is paid off early, it is important that you speak with your loan provider first to ensure you understand this option fully.

The biggest advantage to this is that you will almost always get more by selling a vehicle through a private sale than you would by trading a vehicle in at a dealership. However, because the loan will need to be paid in full before the institution releases the title to you, you will have to pay the difference out of pocket.

In some cases, it may also be possible to transfer a loan to someone else. This may be a bit tricky as the individual will have to go through the same process as they would if they were taking out a new loan, but it might allow you to avoid any negative equity.

Will Carmax Buy a Vehicle with Negative Equity?

According to Carmax, they will purchase vehicles that have loans on them. To sell your vehicle, you will need the financial institution’s information and your information. Carmax will make an offer, and if you agree to move forward, they will reach out to the financial institution to facilitate payment of the loan.

If their offer is lower than what you owe on the vehicle, you will be responsible for paying the difference. If their offer is higher than what you owe, they will either pay the difference to you directly or allow you to put it towards another vehicle. Additionally, you may be able to include any negative equity in a new vehicle loan as well.

It is also important to note that if you previously had a loan on the vehicle that has since been paid, you will need a statement from your lienholder saying the loan was paid in full and the title was released in your name.

If you’re considering buying a used car it’s worth investing a few dollars to check the VIN number against the vehicle database. An audit with a company like VinAudit (links to VinAudit) will guard against Mileage fraud, Salvage rebuilds, Title washing, Vin cloning, and a ton of other uglies.

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Saturday 11th of November 2023

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