Sure you can! Many Canadians decide to do this, for a wide variety of reasons: they’re selling their car and the buyer wants to take over the loan; they can no longer keep up with the monthly repayments; or they simply want to switch lenders. However, before you decide to follow this path, you should check your original loan agreement. Some contracts charge early repayment fees, or may impose constraints on this option. If you’re in doubt, ask the financial advisers at Laneway Auto Loans & Sales for help.
What Are the Easiest Ways to Transfer Auto Financing?
Most auto financing vendors are happy to work with sellers transferring car loans to somebody else. However, a word of warning: the buyer must comply with the lender’s requirements – particularly income and credit score – in order to qualify for approval. There are two main ways of passing your car loan over to somebody else in Atlantic Canada:
- keeping the same lender when transferring your debt, which is common practice when a buyer is happy to finish paying off the outstanding amount of your loan, assuming that they meet all the basic eligibility requirements for borrowers;
- switching lenders, when a new auto loan is issued under the other person’s name, with the previous and latest lenders communicating directly with each other to align conditions, check qualifications, and close the deal.
How to Transfer Your Car Loan in Six Easy Steps
- Contact your lender (who is often the dealership where you bought your car), and ask them whether you can transfer your financing to somebody else. If so…
- Ask if there are any constraints on your loan, particularly if you missed payments; if not…
- Ask them if the prospective buyer is acceptable, in terms of income and credit score; if so…
- Ask them for a list of the documentation you have to provide and complete; and then…
- Fill out all your paperwork well in advance, and keep your buyer posted about your progress, so…
- They can set up a meeting with your lender to sign the agreement and close the deal.
Where Do I Find a Trustworthy Buyer?
Most person-to-person used car sales take place among relatives or friends. However, if you want to cast your net wider, Facebook Marketplace and local community groups in the Maritimes are always good options, as well as local classifieds like Kijiji. To avoid wasting time with unqualified candidates, you should mention that your car is financed, and any non-cash buyer must present proof of income and a good credit score in order to transfer your financing.
Closing the Deal
Once your buyer has kicked the wheels and decided that your car would be a good fit for them, it’s time to put them into contact with your lender, so they can transfer your auto loan. Alter the vehicle documentation immediately, transferring title and liability. To do so, notify your local insurance agency that the car is no longer yours, so it should be registered and insured under the name of the new owner.
Hot Tip: Double check that your loan has been fully transferred before allowing the new buyer to drive away your newly sold car. Until this transaction is completed, you’re still on the hook for those monthly payments and – worse still – any damage to the car will be for your account.
Streamlining the Car Loan Transfer Process
Interest, registration, licensing, insurance, taxes… There’s a lot of paperwork involved in transferring auto financing. This makes perfect sense, because both lender and borrower are accepting heavy financial commitments that extend years into the future, and every step must be completed flawlessly, in order to protect the seller as well.