Legal Question in Credit and Debt Law in Pennsylvania

What you propose is not legal as you have outlined it. What Citi is doing is perfectly legal. You have a couple of options:

(1) Pay off the loan with Citi - either get a new loan or borrow the funds. Then when you get a free and clear title, you can sell the car.

(2) Make a deal with Citi pursuant to which they will release the lien on your old car and allow you to substitute the new car, provided that it has a higher value. You indicated that it does not. In that case, can you pay down the loan a little and let the new car be collateral for the remaining balance.

You cannot sell the car now. Why? Because, when you pledged your car as collateral or security for the loan, you took whatever rights in the car that you had and gave them to Citi to hold until the loan was re-paid. In essence, they now own the car and you cannot sell it unless you get rid of their lien by paying it off or substituting other collateral of equal value in its place. If you try and get a duplicate title and sell the car anyway, you are not only hurting the innocent buyer but you are committing a crime by disposing of collateral that is subject to a secured interest.

Do things correctly and save yourself a lot of headaches.