Selling a car with outstanding finance can seem difficult, but with the right approach, it is quite manageable and only requires some patience. If you're planning to sell your financed car, here's a guide on how to navigate this process involving three key parties: you (the owner), the buyer, and the bank that provided you with the Car Loan.
Clear the loan to remove hypothecation
Before you can sell your car, the outstanding loan must be cleared. This is essential for removing the hypothecation from the Registration Certificate (RC).
Hypothecation means that your car serves as security for the loan, with the lender’s name listed on the RC book. Once you settle the outstanding Car Loan amount, the bank will issue a No Objection Certificate (NOC). You'll also receive two copies of Form 35 which, along with the NOC and other necessary documents, must be submitted to the Regional Transport Office (RTO). The RTO generally takes about two to four weeks to process and remove the hypothecation, after which the car legally becomes yours to sell.
Financing options if you can't pay off the loan
1. Buyer pays the loan: If the selling price covers the loan balance, you can arrange for the buyer to pay the amount directly to the bank. If the selling price is less than the balance, you will need to cover the difference.
2. Negotiate with the bank: As a last resort, discuss with your bank to avoid having your car seized and auctioned. Auctions typically fetch lower prices and might not cover the entire loan, leaving you without the car and still in debt.
Be transparent with the buyer and the bank
Honesty is crucial when selling a car with outstanding finance. Fully disclose all details about the car's condition and any financial obligations attached to it. Transparency prevents legal issues and builds trust with the buyer, potentially making it easier to handle the transaction involving the outstanding Car Loan.
Essential documents for selling your financed car
When you're ready to sell your financed car, it’s important to have all your documents in order. Here’s a checklist to ensure you have everything needed for a smooth transaction:
Personal documents
- PAN card: One self-attested copy to verify your identity.
- Proof of address: One self-attested copy to confirm your residency.
- Passport-size photographs: Two self-attested copies for official records.
RTO documents
- Form 28: Three copies with the chassis number imprinted, necessary for the application of NOC.
- Form 29: Two copies notifying the RTO of the sale of the vehicle.
- Form 30: Two copies reporting the transfer of ownership.
- Form 35 and NOC: One copy with a bank stamp on Form 35, required for the cancellation of hypothecation.
- Sale affidavit: One copy as a legal attestation of the sale.
- Clearance Certificate: One copy confirming that there are no pending taxes on the vehicle.
Car documents
- Registration Certificate (RC): Mandatory to prove the car’s registration details.
- Pollution Under Control (PUC) Certificate: Mandatory to show the car meets emission standards.
- Insurance: Mandatory to prove the car is insured.
- Application of Insurance Transfer: Required if the insurance policy is to be transferred to the new owner.
- Invoice of the car: Required only if there's a mismatch in the RC details.
- Ownership manual: While not a necessity, it can be helpful to the buyer.
- Duplicate car keys: Not mandatory but often requested by the buyer.
Also Read: Procedure, charges & documentation for Car Loan Closure
Conclusion
Remember, selling a car with outstanding finance takes time, so plan accordingly. Use Axis Bank Car Loan EMI Calculator to assess the outstanding balance and any additional fees associated with closing the loan. This tool can also be useful if you’re considering another car purchase on finance. By following these steps and understanding the Car Loan interest rate implications, you can effectively sell your financed car.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
