Selling a car privately can be a great way to get the best price for your vehicle. However, if your car still has outstanding finance, the process becomes a bit more complex. Many Australians are unsure about their rights and responsibilities when it comes to selling a financed car. In this guide, we’ll walk you through everything you need to know about selling a car with outstanding finance and what happens if you buy a vehicle with money still owed on it.
Can You Sell a Car Privately with Outstanding Finance in Australia?
Yes, you can sell a car privately even if it has outstanding finance, but there are strict conditions you must follow. Most importantly, the outstanding loan must be paid off before the buyer can legally own the vehicle.
In Australia, cars with finance attached to them are known as “encumbered vehicles.” This means that the lender (such as a bank or car finance company) has a legal interest in the car until the loan is repaid in full.
Steps to Selling a Car with Outstanding Finance
If you’re planning to sell a car that still has finance owing, follow these steps:
1. Check Your Finance Balance
Before listing your car for sale, contact your lender and request a payout figure. This is the total amount required to clear your loan. Your lender will provide you with an official document showing this amount.
2. Be Transparent with Buyers
Honesty is crucial when selling a car with outstanding finance. Let potential buyers know upfront that finance is still owed on the vehicle. Buyers can check for finance owing on a car by conducting a PPSR (Personal Property Securities Register) check, so it’s best to be upfront.
3. Pay Off the Finance
There are two ways to handle the outstanding finance:
- Pay the loan off yourself before selling the car. If you have savings or can secure a personal loan, this is the simplest option.
- Use the buyer’s payment to clear the loan. Some buyers may be willing to pay the lender directly to clear the debt, ensuring they receive an unencumbered vehicle. In this case, you must coordinate with your lender and the buyer to process the payment correctly.
4. Get a Clearance Letter
Once the loan is repaid, ask your lender for a clearance letter. This document confirms that there is no outstanding debt on the car and provides peace of mind to the buyer.
5. Transfer Ownership
Once the finance is cleared, you can transfer ownership to the buyer through your state’s transport authority (e.g., VicRoads, Service NSW, or the Department of Transport WA). Make sure to complete all paperwork and provide a receipt for the sale.
What Happens if I Buy a Car with Outstanding Finance in Australia?
If you buy a car that still has outstanding finance, you risk the lender repossessing the vehicle. Even if you were unaware of the debt, the finance company has the legal right to claim the car until the loan is paid off.
How to Protect Yourself as a Buyer
To avoid purchasing a car with finance owing, follow these steps:
- Conduct a PPSR Check – Before buying a used car, visit the Personal Property Securities Register (PPSR) website and conduct a finance check using the car’s VIN (Vehicle Identification Number). This report will tell you if the car is under finance.
- Ask for a Finance Payout Letter – If the seller admits that finance is still owing, ask for an official payout letter from their lender.
- Ensure the Finance is Cleared Before Paying – If the seller is using your payment to clear the loan, confirm with their lender before finalizing the sale.
- Get a Written Agreement – If you are proceeding with the purchase despite outstanding finance, ensure both parties sign an agreement outlining how and when the loan will be repaid.
Pros and Cons of Selling a Financed Car Privately
Pros:
✅ You may get a higher price compared to trading it in at a dealership.
✅ More control over the selling process.
✅ Potential buyers may prefer a private purchase for a better deal.
Cons:
❌ Can be complicated due to the finance payoff process.
❌ Some buyers may be hesitant to purchase a financed car.
❌ Requires more paperwork and communication with the lender.
FAQs About Selling a Car with Outstanding Finance
1. Can I Transfer My Car Loan to the Buyer?
No, car loans are not transferable in Australia. The buyer must arrange their own financing if needed, and you must pay off your existing loan before selling the vehicle.
2. What if I Can’t Pay Off My Car Loan Before Selling?
If you don’t have the funds to clear the loan before selling, consider these options:
- Negotiate with your lender for an early payout arrangement.
- Trade the car in at a dealership, as they often handle finance payouts.
- Consider refinancing your loan to a more manageable amount before selling.
3. Will a Dealer Buy My Car If It Has Outstanding Finance?
Yes, many dealerships will buy a car with finance owing. They will typically pay the lender directly and deduct the amount from your sale price.
Final Thoughts
Selling a car privately with outstanding finance in Australia is completely legal, but it requires extra steps to ensure a smooth and transparent transaction. Whether you’re a seller or a buyer, always conduct proper checks and communicate openly to avoid any financial or legal complications.
By following the right process and ensuring the loan is cleared, you can successfully sell your car while giving the buyer confidence in their purchase.
Need expert advice on selling a financed car? Contact us at Car Finance for Pensioners for guidance on handling outstanding car loans efficiently!
