I’ve been hit with this question quite often. What do you do when you still owe on the loan for your ATV, but you either want to sell or trade it in?
It’s a very good question, and I will break it down as best I can to give you a better understanding of why and what you can do.
Trade ATV In
If you still owe on the machine and you want to trade it in for another one or something else, you might run into some problems. The problems will be only what you owe on the loan.
Most dealerships will allow you to trade in your machine, no problem.
If you still owe on the bike, then someone is got to pay off that balance to the bank. Just because you want something new does not mean the loan disappears, the bank doesn’t care about the bike they just want to be re-paid for the money they loan you.
So let me give you an example of what it will be like when you trade your ATV in…
So lets say you want to buy a new ATV that is $10,000 out the door. You have an older one that KBB values at $5,000. But you still owe $6,000 on it. The dealership you want to buy the bike from will call the bank and get the exact payoff amount. The new ATV is $10,000 out the door and you still owe $6,000 on the old ATV, so you must add those two numbers together and you’ll get $16,000. Now don’t panic, you have positive value of the trade in. So you’ll then subtract the $5,000 trade in value from $16,000 and you’ll be left with $11,000. So really you’re just paying the difference which is $1,000 and that gets added to the out the door price. So you’ll be financing $11,000 plus the interest.
Since you still owed on the bike you still had to pay that loan amount off, but since you have value in the ATV that can subtract from it. The goal should be when you finance something is to not have negative equity in it. In the example, you have $1,000 of negative equity in the ATV. The person that pays that is you and gets rolled into the new machine.
To avoid negative equity is the put some money down even if you don’t need to. It’s best to put down 10% to 20% down so that you can stay ahead. This is only important to do if you expect to trade into a new machine in the future. If you’re the type of person to only buy something new every 20 years then this really does not matter.
The main takeaway from this is that if you still owe on the ATV the loan needs to be paid off and the person that needs to pay it off is you. The dealership is not going to pay it off no matter what you think, unless they’re really stupid then you might have a chance.
Selling The ATV
If you want to sell the ATV to another person but you still owe on it what can you do? What you need to do is figure out how much you still owe on the loan.
The next thing you need to do is to figure out what the retail value of your ATV is by going to KBB here. Don’t stop at KBB, also go to NADA and see what they say and take the average of them. Another thing I like to do is go to eBay and see what they’re really selling for in the real world.
If you owe more than what the machine is selling for then you’re in a bit of a pickle. If you don’t owe more than what it’s worth then list it and sell it to someone. Write up a bill of sale and both you sign it, then pay off the loan. The bank will mail you the title or MSO and then you sign the back of it and mail it to the new owner. Make sure to get everything that needs to be notarized done.
If you still owe on the loan you still do the same thing above, but you won’t get the title until the loan is completely paid off. So whatever the difference you need to give it to the bank so that they can give you a title.
Don’t try to screw someone over by not paying the loan off because it’s illegal and you can get in a lot of trouble. Also, your credit is on the line and if you ever want to buy or rent anything ever again it’s best to pay off the loan when due.
Saying this brings me to my next point for the people looking to buy an ATV with a lien on it.
Buyer Beware
If you’re looking to buy an ATV from someone who still owes on it then you’re taking the most risk of anyone. It’s best to do the deal at the bank where they financed it at. This way you know the exact payoff and if the bank has the title they can give it to right away.
If you give someone money for an ATV, and they still owe on it, and they don’t pay off the loan, then the bank is going to come looking for your new toy. They don’t care if you paid “billy” money, the bank still owns it since they have the title for it. If this happens, you’ll be out your money and the ATV. This is why I like buying used from dealerships to avoid this mess.
Before even considering buying the ATV, I would do a VIN check. Just to make sure it’s not stolen or in some other type of mess.