Recording Sale of Car with Loan Paid off at Sale

You treat the loan payoff as cash received from the purchaser.  You journal entry would look something like this.  I am using $10K as the accumulated depreciation, but you will need to use whatever the actual amount is as of the sale date.

                                                                    DR                             CR

Vehicle (fixed asset)                                                                     75,000

Loan (liability)                                             40,000

Cash                                                           35,000

Accumulated Depreciation                          10,000

Gain/Loss on Sale                                                                        10,000