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How to Handle a Remaining Car Loan or Lease When Scrapping

A vehicle with an outstanding loan or lease needs an extra step or two before it can be scrapped. Here is the general process.

  1. Determine whether the car is financed or leased

    With a financed vehicle, you own the car outright but a lien is typically registered against it, while with a lease, the vehicle's legal ownership belongs to the leasing company β€” the two require different handling.

  2. Check your loan balance and any lien

    If a loan balance remains, a lien is likely still registered against the vehicle, and you generally need to pay it off and have the lien released before scrapping or deregistering the vehicle.

  3. Pay off the loan and clear the lien

    Pay the remaining balance to your lender, obtain the lien-release documentation, and submit it to the scrapyard or relevant authority.

  4. Coordinate with the leasing company for a leased vehicle

    If a leased vehicle needs to be scrapped mid-contract, notify the leasing company of the accident or scrapping situation and get guidance on early-termination settlement and how any residual value is handled.

Check for early-repayment fees

Paying off a loan early to clear it can sometimes come with a fee. It is worth understanding how early-repayment charges typically work before deciding when to settle the balance.

Have your paperwork ready in advance

Lien-release documents or a certificate of loan payoff are often required to be submitted together with your scrapping application, so it is worth gathering these ahead of time to avoid delays.

Frequently Asked Questions

Does having an outstanding loan balance mean I cannot scrap the car at all?

No. Once you pay off the remaining loan balance and have the lien released, you can proceed with scrapping and deregistration as normal.

Can I just hand a leased vehicle over to a scrapyard on my own?

No β€” because legal ownership of a leased vehicle belongs to the leasing company, you must coordinate with them first before taking any action.