What to Know About Selling a Car Under Finance
Selling a car is a significant decision, and it becomes more complex if the vehicle is still under finance. At Car Buyers Assist, we’re here to help you navigate all aspects of selling your car, whether you are looking to sell, buy a new car, or need assistance with finance and insurance. Here’s a detailed guide on everything you need to know about selling a car under finance.
What Does ‘Under Finance’ Mean?
When a car is under finance, it means there is still an outstanding loan on the vehicle. Most car loans are secured loans, where the car serves as collateral. If the borrower fails to make repayments, the lender has the right to repossess the vehicle to cover their losses.
Secured car loans require that the loan is paid off or the car loan is transferred when the car is sold. If you have an unsecured loan, you can sell your vehicle without restrictions but must continue to make the loan repayments if the sale price doesn’t pay the loan out completely.
Is Your Car Encumbered?
An encumbered car means it has an outstanding debt against it. For example, if you took out a $30,000 loan to buy a car and still owe $5,000, the car is encumbered by $5,000. The car remains encumbered until the loan is fully paid off.
If you purchased the car with an unsecured loan or credit card etc it’s not considered encumbered as the lender can’t repossess the vehicle if repayments are missed.
Is It Legal to Sell a Car Under Finance?
Yes, it is legal to sell a car under finance hoowever you must pay off any outstanding loan once the car is sold. For example, if you sell your car for $18,000 and owe $5,000, you must use part of the sale proceeds to clear the loan balance.
Depending on your loan terms, you might need to pay break fees or early repayment charges. Check your loan contract or consult your lender to understand any additional costs.
Steps to Sell a Car Under Finance
- Inform Your Lender and check Your Loan Balance: Explain to your lender your intention to sell the car and ensure you know the exact amount you owe. You can ask your lender for this information, though they may charge a fee. Alternatively, perform a Personal Property Securities Register (PPSR) search for $2 at ppsr.gov.au.
- Maximize Resale Value: Maintain your car well to get the best possible sale price. Regular servicing, replacing tyres, fixing damages, and cleaning the car can significantly boost its resale value.
- Disclose Finance Status to Buyers: Be transparent with potential buyers about the car being under finance. This honesty is crucial as it affects the buyer’s decision and your credibility.
- Use Sale Proceeds to Pay Off Loan: Once the car is sold some of the proceeds will be used to pay off the remaining loan balance. This step is crucial to transfer clear ownership to the buyer.
- Transfer Ownership: Provide the buyer with proof of sale and transfer the registration title to their name.
Maintaining Your Car to Maximize Resale Value
To ensure you get the best price for your car, consider the following tips:
- Regular Servicing: Keep up with scheduled maintenance to ensure the car runs smoothly.
- Replace Tyres: Worn-out tyres can decrease the car’s value, so replace them if necessary.
- Fix Damages: Repair any chips, scratches, or cracks to improve the car’s appearance.
- Clean Thoroughly: A clean car makes a better impression on potential buyers.
Looking to Pay Off Your Car Loan Sooner?
Paying off your car loan before selling can simplify the process. If you’re looking to upgrade your vehicle and need a new car loan, consider exploring low-rate car loans. Car Buyers Assist partners with a large panel of lenders offering some of the most competitive interest rates on the market.
Use our car loan calculator to estimate your repayments and find the best loan option for your needs.
Conclusion
Selling a car under finance involves several steps, from understanding the legal aspects to maximizing your car’s resale value. By following the guidelines outlined above, you can navigate the process smoothly and efficiently. At Car Buyers Assist, we’re here to help with all your car selling, buying, financing, and insurance needs.
For more information or personalised assistance, visit our website or contact us directly. We’re here to make your car selling and buying experience seamless and successful.
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