It is advised that you look into whether the used car you want to purchase still has loans due when you are looking around. What transpires then if your dream car is still financed?
It is possible for buying a vehicle still under finance that is still due, but you might have to go through a few extra hoops. Let’s discuss what to do next and your options if there is still a finance balance on the car you want to buy.
Buying a vehicle still under finance
In Australia, it is the responsibility of the buyer to determine whether financing is due before making a purchase. Since the debt is frequently secured by the car, you can be responsible for it if you buy a car with financing that isn’t paid off in full upfront. You must therefore exercise due diligence.
Execute a PPSR search
First off, it’s crucial to consider additional risk factors, such as if the automobile has been stolen or declared a total loss by an insurer, when buying a vehicle still under finance. It’s not unusual for a private seller to try to sell a written-off vehicle or a vehicle with a secured loan balance. An excellent place to begin is by arming yourself with as much information as you can.
Even if you can ask the seller for this information, it is nevertheless advised that you check the Personal Property Securities Register yourself (PPSR). Australians can learn about security interests in personal property on this government website.
A PPSR search can provide information on the brand, model, and color that has been logged against the vehicle identification number (VIN) or chassis number, but more importantly:
- If there is unpaid debt on the car
- If an insurer has declared the car a total loss
- If the item was stolen
- If it is a component of the mandatory Takata airbag recall due to flaws
The amount of finance still owed on the car, its ownership history, any unpaid fines, and details like the odometer reading are not disclosed in a PPSR. When you pay for a PPSR search as part of your legal records for the car, you will receive a search certificate.
It is advised that you run a PPSR search the day of or the day before you intend to buy the car. According to the PPSR website, it is best to conduct your search “near to the time of purchase.”
Verify funding with their lender
It’s reasonable to feel anxious about buying a vehicle still under finance due, therefore it would be worthwhile to ask the seller’s auto financer for a dated payout quotation or letter outlining the exact amount still owed on the automobile. It can be worthwhile to look at alternative vehicle options if a seller is unwilling to ask their lender to do this for you.
You are not obligated to pay off someone else’s auto loan. However, it’s likely that the payment you make for the car will be applied to the balance of the loan. This indicates that in order to pay off the vehicle finance, the seller could need to first obtain payment from you.
Secure your transaction
You should select the most secure payment method that gives you peace of mind because you might need to pay for the car before the seller can pay off the loan.
Let’s say the used car you want to buy costs $10,000, and the loan balance is $4,500. One choice is to give the seller two payments:
- Repayment of the loan’s outstanding balance of $4,500. The seller will then give you an updated statement from the financier right away to verify that this has been settled in full and the vehicle is no longer subject to any debt.
- A $5,500 payment for the balance of the purchase price.
As an alternative, you can communicate with the financier personally and explain your plans for financing the car. You can provide the financer $4,500 and get a direct acknowledgment that it has been paid in full. After that, you can provide the seller your direct payment of the balance ($5,500).
A change in ownership
It is advised that all parties set up the transfer of ownership for the car at this time. For instance, in NSW, you must transfer ownership of a registered vehicle within 14 days of the purchase in order to avoid paying a late transfer fee.
Informing Transport NSW of the vehicle’s disposal should be done by the vendor. If they haven’t done this, you, the buyer, can still finish the ownership transfer at a Service NSW Center nearby. To avoid paying the late transfer fee, make sure to do so within 14 days of the purchase.
Is it worth buying a vehicle still under finance? There’s no reason why purchasing a car with a financed title should be any more challenging than purchasing one with a clear title if you conduct thorough research ahead and deal with an honest seller. However, it’s crucial to confirm there is no outstanding debt on the car when you sign your name to the bill of sale.
Similar to going to a bank or real estate agent to sign the papers for purchasing a home, the only difference is that the numbers on the papers you are signing are somewhat less likely to cause you to experience heart palpitations.