Selling a Car with Outstanding Loan: The Legal Way (How to Avoid Jail)

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A common misconception among car owners is: "It's my car, I can sell it if I want."

Wrong. If you are still paying monthly installments, the bank is the Owner, and you are merely the Hirer. Selling the vehicle without the bank's permission is a criminal offense known as Embezzlement (Misappropriation).

However, selling a financed car is possible if done correctly. Here is the complete guide to selling a car with an outstanding loan legally in Thailand.

The Danger Zone: "Selling Down Payment" (Kai Dao) Without Contract Change

• The Scenario: You give the car to a buyer, take some cash, and they promise to "continue paying the installments" under your name.
• The Risk: This is illegal.
  • If the buyer stops paying, the bank will sue YOU.
  • If the buyer sells the car to a third party (black market), you are liable for the lost asset.
  • If the buyer uses the car for drugs or crime, YOU are the prime suspect.
• The Law: You can be charged under Section 352 of the Criminal Code for Embezzlement.

Method 1: Closing the Account (Cash Sale)

Best for: When the Car's Market Value > Outstanding Loan Balance.

This is the cleanest method. You pay off the entire remaining debt to the bank to get the "Blue Book" (Title Deed), then transfer ownership to the buyer.

The Process:

1. Check "Payoff Amount": Contact your bank to ask for the total closing balance (usually includes a discount on remaining interest).
2. Find a Buyer: Agree on a price.
3. Coordinate at the Bank:
   • Meet the buyer at the bank.
   • The buyer pays the debt directly to the bank.
   • The remaining profit (if any) is paid to you.
4. Transfer: The bank sends the Blue Book (usually within 7-14 days). You then transfer the car to the buyer at the Department of Land Transport (DLT).

Method 2: Transfer of Hire-Purchase Rights (Changing the Contract)

Best for: When the buyer wants to pay installments, or you just want to get rid of the debt.

This is the only legal way to let someone else take over your installments.

The Process:

1. Check Eligibility: Most banks require the car to have been financed for at least 1 year (or 12 installments paid).
2. Vet the New Buyer: The new buyer must have good credit and salary documents, just like applying for a new loan.
3. Apply at the Bank: Both parties go to the bank to sign a "Transfer of Rights" agreement.
4. Fees: Be prepared to pay:
   • Contract Transfer Fee (~1,500 - 4,000 THB).
   • Advance Installments (Usually 1-2 months required from the new buyer).
   • New Insurance policy (sometimes required).
5. Approval: Once the bank approves, your name is removed from the debt completely.

Comparison: Which Method is Right for You?

Conclusion

Selling a financed car is not just about handing over keys; it’s about clearing your legal liability. Never sell a car using a "handshake agreement" or a simple police blotter record—these do not protect you from the bank.

Confused by the math?

Not sure if you should close the account or transfer the contract? Consult with Motorist Thailand. We can calculate your car's valuation versus your outstanding debt and match you with dealers who can handle the "Closing Account" process for you legally and instantly.

Reference Sources

1. Civil and Commercial Code: Hire of Property & Hire-Purchase Sections.
2. Criminal Code: Section 352 (Embezzlement).
3. Bank Procedures: Krungsri Auto (Transfer Rights), TISCO Bank.

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