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How To Sell Or Buy A Car Under Finance

You can save a lot of money buying a car secondhand, so don’t let finance put you off. The process is pretty simple – you’ll just need to include the lender in the process.

SELLING

What you need to know

Selling a car under finance is legal but there are a couple of things you’ll need to consider. Most car loans are security loans with the car as surety, which means if you default the lender can sell your car.

If you have another loan type against the car – like a personal loan – you will still need to pay it off.

Not all lenders will let you sell a car with debt either, so check first.
You might take a hit on price because buyers can get nervous about purchasing a car that isn’t paid off.
Be aware that if you don’t pay off your car when you sell it, the loan will transfer to the new owner.

What steps you should take

You’ll need to tell the buyer that the car is under finance.

Talk to your lender to find out how much you still owe on your car.
Check if there are any exit costs and find out what process your lender wants you to follow.
You’ll have a few choices when you sell – you can pay off the loan with the proceeds, continue paying it off or transfer the loan with the car.
You can also get a letter from your lender for the buyer to show how much you owe, and once settled, another to show you have cleared the debt.

BUYING

What you need to know

You can buy a car under finance. It just means you will need to be clear on how much is owing and to who. You can visit the Personal Property Security Register (PRSR). It costs just $2.

In Australia, it is the buyer’s responsibility to check if there is finance on it.
When you buy a car under finance, you will be liable for the debt that it comes with.
It’s usually simpler to get the seller to pay off the debt first before you buy it.

What steps you should take

If you decide to buy a car under finance you have three choices. You can take the debt on, make sure the seller has cleared the debt or pay the seller and the debt off yourself.

If you decide to buy a car under finance, do the exchange at the lender’s office. This way you know how much debt you are taking on. The price of the car should also reflect this, so if you want to spend 10K, and the car has 5K owing, you should only pay 5K to the seller.
If the buyer has agreed to pay off the car, check that the PRSR shows the debt is cleared before completing your purchase.
You can also pay off the outstanding debt direct to the lender and pay the seller separately.
Once the debt is settled or moved to you, the registration can be signed over.