Is It Legal to Sell a Financed Car in Dubai?

Selling a car that is still under finance in Dubai is possible, but it requires following the legal procedures set by the UAE government and financial institutions. Many car owners who are looking to sell their vehicles wonder whether they can do so if they haven’t finished paying off their car loan. The short answer is yes, but there are specific steps you must take to ensure a legal and hassle-free transaction.

Understanding Car Financing in Dubai

Car loans in Dubai are typically secured by the lender, which means that until the full loan amount is paid, the vehicle remains under the bank’s ownership. When a car is financed, a mortgage or a lien is placed on it, preventing the owner from transferring ownership without clearing the loan.

Steps to Sell a Financed Car in Dubai

1. Check the Loan Balance

Before selling your financed car, you need to find out how much you still owe on the loan. This information can be obtained from your bank or financial institution.

2. Pay Off the Outstanding Loan

To transfer ownership legally, you must settle the outstanding balance. Here are some ways to do this:

Pay the loan yourself: If you have sufficient funds, you can clear the remaining loan amount and obtain a clearance letter from the bank.
Have the buyer pay directly to the bank: Some buyers may agree to pay off your loan as part of the car purchase deal.
Use a bridging loan: If you don’t have immediate funds, you can take out a short-term loan to settle the balance and then repay it once the car is sold.

3. Obtain a Clearance Letter

Once the loan is fully repaid, the bank will issue a clearance letter stating that the vehicle is free of any financial liabilities. This letter is essential for the transfer process.

4. Remove the Bank's Mortgage from the Car Registration

After obtaining the clearance letter, you need to visit the RTA (Roads and Transport Authority) to remove the bank’s mortgage from the vehicle registration.

5. Transfer Ownership to the Buyer

With the mortgage removed, you can now proceed with transferring the car to the new owner. This step requires:

A valid Emirates ID
A valid driving license
The car’s Mulkiya (registration card)
Vehicle insurance (either existing or new)

The buyer must also ensure that the car has passed the RTA vehicle inspection before finalizing the transfer.

Alternative Ways to Sell a Financed Car

If you don’t want to handle the process yourself, you can consider:

Selling through a dealership: Many car dealerships in Dubai are willing to handle the loan repayment and transfer process for you.
Using a car buying service: Companies like Car Buyers Dubai offer services to buy financed cars and take care of the paperwork.

Legal Considerations and Risks

Avoid illegal transactions: Selling a financed car without clearing the loan is illegal in Dubai and can lead to penalties or legal consequences.
Inform the buyer about the loan: Always disclose any financial obligations on the car to avoid disputes later.
Check for early settlement fees: Some banks charge a fee for paying off the loan early, so factor this into your selling price.

Conclusion

Yes, it is legal to sell a financed car in Dubai, but it requires following the correct procedures. Whether you choose to settle the loan yourself, involve the buyer in paying off the loan, or sell through a dealership, ensuring that the car is free of financial obligations before transferring ownership is crucial. If you’re looking to sell your financed car quickly and with minimal hassle, Car Buyers Dubai can assist you with the process, making it seamless and stress-free.