BERLIN— Volkswagen AG on Friday reported a drop in new-car sales in October as a result of sharp declines in some emerging markets and troubles for its namesake VW brand in the U.S. and Europe stemming from the company’s emissions scandal.

Meanwhile, the Wolfsburg, Germany-based auto group is negotiating with a group of banks to assemble up to €20 billion in short-term financing, as it braces for emissions-related costs, according to a person familiar with the matter. Volkswagen has already earmarked nearly $10 billion to cover costs related to the scandal.

Talks are set to begin next week to assemble the debt financing, which Volkswagen wants to have in place by the end of the year, the person said.

The company’s global sales last month fell 3.5% from a year earlier to 831,300 vehicles, with declines in Russia and Brazil leading the way. Auto sales in the two countries have suffered badly in slumping economies. For the year through October, Volkswagen’s sales dropped 1.7% to 8.3 million, according to The Wall Street Journal.

The company’s VW, Skoda and SEAT brands were most affected by the emissions crisis, and they all showed global declines for the month. The steepest was for VW vehicles, Volkswagen’s biggest business, which fell 5.3% to 490,000.

Sales in Western Europe, the brand’s biggest market after China, slipped 1.3%, as several countries including France and Italy ordered a halt to VW sales in the wake of the crisis. VW’s falloff contrasts with a robust recovery in the Western European market overall, including a 10% increase in new-car registrations in September.

“In Western Europe, the temporary sales-stops for vehicles affected by the diesel issue had an impact on sales,” said Jürgen Stackmann, board member at the VW brand in charge of sales.

A company spokesman said the sales-stops in Europe have been lifted and wouldn't affect November sales.

Volkswagen plunged into crisis in September, when U.S. environmental regulators said the auto maker installed software in nearly 500,000 diesel vehicles in the U.S. that helped them evade emissions standards. Volkswagen has since acknowledged installing the software in nearly 11 million diesel vehicles world-wide.

Most of the vehicles affected can be repaired with a simple software update beginning next year, Volkswagen has said. About 540,000 cars, those with older 1.6-liter diesel engines, will need a more complicated hardware fix.

Next week, Volkswagen will present its proposed solutions for repairing the cars to regulators in Europe and the U.S.

Volkswagen executives are expected to present a work-around fix on Monday for the 1.6-liter diesel engines to a committee of experts set up by German Transport Minister Alexander Dobrindt, a person close to the company told The Wall Street Journal.

The fix, the person said, is expected to be less complicated and not as costly as initially thought, and will bring the vehicles into compliance with European emissions standards.

Volkswagen officials are expected to meet officials from the U.S. Environmental Protection Agency on Nov. 20 to present a solution for nearly 500,000 cars in the U.S.

The EPA has also alleged that Volkswagen installed cheating software on 10,000 larger 3.0-liter engines used in luxury sedans and sport-utility vehicles made by VW, Audi and Porsche. Volkswagen disputes the claim, and says the emissions-control software on those vehicles is legal and shouldn’t be considered a “defeat device.”

Volkswagen also disclosed last week that it understated greenhouse-gas emissions and fuel consumption in as many as 800,000 vehicles in Europe, including gasoline-powered vehicles. On Friday, the company said the estimate included 430,000 model-year 2016 vehicles and that it was still trying to identify models from earlier years.

The company is currently testing these vehicles to see how much actual CO2 emissions veer from what the company stated when they were certified. Some cars will likely be reclassified and Volkswagen has agreed to pay any additional back sales tax.

Volkswagen also isn’t ruling out that it may have to take back some of the cars that understated CO2 emissions, a spokesman said. No decisions have been made yet, he said, and any solution would depend on the outcome of the tests.

In the U.S., where the scandal first erupted, deliveries for the Volkswagen group overall rose 5.7% in October, while VW brand sales were up 0.2%. Despite the uptick, Volkswagen trailed other auto makers in the U.S., where light-vehicle sales increased nearly 14% in October. Sales for General Motors Co., for example, climbed about 16%.

Volkswagen offered a $1,000 goodwill package this past week to U.S. customers whose vehicles were affected by the software, in what it called a first step in rebuilding trust.

“The entire company is working to restore the trust of our customers,” Mr. Stackmann said. Volkswagen would “take care of each individual customer who is affected,” he added.