Can You Sell a Car Under Finance?

Selling a car is often complicated. There are plenty of things to do and prepare for, but it is even more difficult when you still owe money on the vehicle. The easiest way to sell a car financed is to pay off the car loan before or even during the sale of the vehicle. Doing so will allow you to clear the title, which makes the entire process a little bit more straightforward.

The specific course of action will vary depending on a few factors. Answer questions such as, “Where is the loan held?” and “Will you be selling to a dealership or a private buyer?


Can You Sell a Car on Finance?

Before you search for a guide on how to sell a car under finance, it makes sense to know if it is even possible for you to do so. Can you sell a car under finance? The answer is yes – at least, in Australia, it is. Note that selling a car with an outstanding loan is illegal in other parts of the world. After all, you have not paid for the money owed, which means you are technically not the car’s owner.


Who Do You Owe and How Much?

You do not have to search far and wide to find the amount you still owe and who you owe it to. The answer is found in your car loan agreement. If you still have questions about your debt, contact the bank or lender for answers. One important question you should remember to raise during your discussion is whether you will incur additional fees should you close the loan early by paying it off in advance.

You should also enquire if there are any special procedures you need to follow on how to sell a car under finance. Lenders typically have distinct rules and steps, which include paying off the loan and the specific car loan product.

So, let us say your loan is labelled as a Personal Contract Purchase (PCP). With this type of financing, you purchase the car through fixed monthly payments of an agreed duration. You pay the initial deposit upfront, a percentage of the car’s value. You also pay the loan monthly, which covers the car’s depreciation value during the contract period. Under this agreement, you may be allowed to terminate early by paying the outstanding balance without facing exorbitant fees.

However, there are loans where you do not gain ownership until you have fully settled the loan. Also, in some cases, the car is used as collateral or is encumbered unless you paid with your credit card. In such a situation, the car is not secured because of the unsecured line of credit used. The same principle applies when you have financed the purchase against your mortgage. Your house – not the car – is used as collateral for your debt. That’s why it is crucial to understand the type of loan you have before you put your car up for sale.


How Do You Plan to Pay the Loan?

Because you already know the answer to “Can you sell a car under finance?” the next step is to know your options in paying off the loan. You have two:


1. Pay the Loan in Full Before Selling

Of the two options, this one is the easier route to take. But beware; you need to tell your prospective buyers that you’re selling a car under finance. Unfortunately, most buyers are not too keen on vehicles with financial baggage. Another issue with this strategy is that your lender may not allow you to sell the car, particularly if it serves as the loan’s collateral. Don’t worry, though; you can always discuss this issue with your lender.

On the other hand, if the loan is secured against another asset, such as your house, you will generally have no problem selling the car like normal. Bear in mind that you still have to pay your balance before putting the car up for sale.


2. Sell the Car and Use the Proceeds to Pay for Your Outstanding Loan

This method is great if you want to get rid of your car immediately and pay off the loan. But since you will pay off the loan early, be sure to get a settlement figure from the lender before you sell the car. Once the buyer pays the vehicle’s price in full, you can then repay your loan.


How to Sell a Car Privately with Outstanding Finance

Selling a financed car requires more work than selling one that’s fully paid off. The following steps will help you navigate the process so you can sell your vehicle privately without any issues:


1. Check if You Have Finance Left to Pay

Are you sure your car is still under finance? The quickest way to check is to contact your lender, who can also tell you how much you need to pay, including extra charges, fees, or penalties, to gain full ownership of the vehicle. Another method is through the Personal Property Securities Register website, where you can perform a car search for $2 and learn whether it is stolen, in debt, or written off. This step works wonders if you wish to buy a used car, as well.

Once again, you must remember that not all lenders would allow you to sell the car until you have fully paid your loan. So, only start looking for a buyer if you know you can afford the repayment.


2. Boost Your Car’s Value With Maintenance

Whilst waiting for a buyer, be sure to maintain your car regularly. Keep it in good condition by improving its performance and reliability. Some things you can do are oil changes, tune-ups, and fluid checks just so your car runs smoothly and efficiently.

Advertising the sale of your car does not mean you will get a barrage of calls from potential buyers. And even if you do, it does not guarantee a deal. That’s why you still need to schedule inspections and repairs as you normally would, helping you extend the car’s lifespan. These simple actions can have a positive impact on your car’s overall value.


3. Demonstrate Regular Servicing

It’s not enough to properly maintain your vehicle; you should also have proof of car servicing history. Keep a logbook that documents all the services provided on the car by a professional. These services include checks on tyre pressure, engine lights, oil levels, and coolant.


4. Change the Tyres

New tyres provide safety and good road performance with improved traction, handling, and braking. They not only enhance the driving experience but also increase buyer confidence. Replacing your old tyres also removes tyre and rim scrapes, which many car enthusiasts call “gutter rash.” Although getting new tyres will cost about $100, it can add more to your car’s overall value.


5. Fix Any Superficial Problems

Buyers generally demand to see your car in person and, therefore, should be as presentable as possible. That means it should not have chips, cracks, scratches, and other blemishes, which suggest poor maintenance and neglect. Address these issues first to guarantee a positive first impression with a potential buyer.


6. Clean It Thoroughly and Fill the Tank

Can you sell a car under finance AND dirty? That’s a double whammy – unless you are willing to get a lowball offer (which you probably don’t). Since first impressions matter, you need to present a clean car to a potential buyer. It shows that the vehicle has been well taken care of, which also increases its perceived value.

Although filling up the tank is not a requirement, it is usually considered a thoughtful gesture, which the buyer will surely appreciate.


7. Give Your Buyer Peace of Mind

Some buyers will want all the documentation you can provide before they purchase your car with finance owing. One thing that you can do is to take them to your lender to reassure them that you will pay off the loan once they pay the car in full.

You may also need to know how to sell a car privately with outstanding insurance. Before selling, you may have to notify your insurance company regarding your planned sale. You may have to talk to your buyer to determine their insurance requirements, whether they have their insurance coverage or need temporary cover to drive the car.

Certain buyers, though, may not be comfortable with the idea of purchasing a car under finance. Suppose you have provided them with proof of documentation and loan records yet still require more to be convinced. In that case, it may be time to look for another buyer.

To make it easier for you, turn to We Buy Your Car WA. It’s in our name. We make selling cars quick and stress-free, even for those with finance owing. Learn more about how to sell a car under finance with us today!

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