How to Sell a Car When It Is Financed
Plenty of car owners find themselves wanting to move on from their vehicle before the finance is fully paid off, and the good news is that it is absolutely possible to do so.
If you’re wondering how to sell a financed car, this blog guides you through the process clearly, so you know what to expect at each stage.
So, Can You Sell a Financed Car?
Yes, you can sell a financed car in Australia. There is no law preventing you from selling a car that still has money owing on it. The requirement is that the loan must be settled before or at the point of the ownership transfer. This means you need to plan the process carefully so the payout and the sale happen in the right order.
The lender holds a financial interest in the vehicle until the loan is cleared. This is recorded on the Personal Property Securities Register (PPSR), which any buyer can check. Understanding this from the start helps you avoid complications when it comes time to sell.
How to Sell a Car Under Finance
Step 1: Find Out Your Payout Figure
Before you do anything else, contact your lender and ask for the exact payout figure. This is the amount you need to pay your lender to completely clear the loan. It includes:
- The remaining loan balance
- Any interest that has built up to the payout date
- Any early payout or loan termination fees charged by the lender
Ask your lender for the payout figure in writing. Most payout quotes are only valid for a limited period, so check how long the quote remains valid before you proceed with the sale.
This step is non-negotiable. You cannot legally transfer ownership of a financed vehicle until the loan is discharged.
Step 2: Know What Your Car Is Worth
Once you know your payout figure, the next step is to find out how much your car is worth. This helps you work out if the sale price will be enough to pay off the remaining loan.
If your car is worth more than the amount you still owe, the process is straightforward. You can use part of the sale proceeds to pay off the loan and keep the remaining amount.
If your car is worth less than the amount you owe, you will need to pay the difference yourself. This amount must be covered before or during the sale so the loan can be fully cleared. This situation is known as negative equity, which simply means you owe more on the loan than the car is currently worth.
To get a realistic idea of what your car is worth, look at factors such as:
- The make, model, and year.
- The current odometer reading
- The vehicle’s overall condition
- Current demand for similar cars in the Sydney market
You can use online valuation tools, compare prices for similar vehicles listed for sale, get quotes from car buyers, or speak with a dealer. Taking the time to understand your car’s market value can help you set a reasonable asking price and work out if the sale proceeds will be enough to cover your remaining loan balance.
Step 3: Decide How You Will Pay Out the Loan
Once you know your payout figure and your car’s market value, you can decide how to handle the remaining finance. There are two options.
Option A: Pay Out the Loan Before Selling
If you have the funds available, paying off the loan before listing your car can make the process simpler. Once the finance is cleared, your lender will confirm that the loan has been settled and remove their financial interest in the vehicle.
At that point, you can sell the car just like any other vehicle that has no outstanding finance attached to it.
Option B: Pay Out the Loan as Part of the Sale
Many people choose to pay off the loan during the sale process. In this situation, part of the sale proceeds is used to clear the remaining finance, and the lender releases their interest in the vehicle once the loan is paid.
If you are selling to a car buyer or dealership, they have the experience of handling financed vehicles and can help coordinate the payout process.
If you are selling privately, there are a few extra steps involved. The buyer may want confirmation from your lender about the outstanding balance and how the loan will be settled. In some cases, part of the payment is made directly to the lender, with the remaining balance paid to you.
Being open about the outstanding finance and keeping your lender involved throughout the process can help the sale go more smoothly and give the buyer confidence to proceed.
Step 4: Gather the Required Documents
Having the paperwork ready can make the sale process quicker and help reassure buyers that everything is being handled correctly.
Documents you will need include:
- Proof of identity, such as a current NSW driver’s licence
- The vehicle’s registration details.
- A payout letter from your lender showing the amount required to clear the loan
- Confirmation from your lender that the finance has been paid out, if the loan has already been settled
- A PPSR check showing that there is no outstanding finance attached to the vehicle after the loan has been cleared
If you are selling to a car buyer or dealership, they can assist with much of the paperwork and guide you through the process. If you are selling privately, you will need to organise the documents yourself and work with your lender and Service NSW to complete the ownership transfer correctly.
Step 5: Complete the Sale and Transfer Ownership
Once all the paperwork is ready, you can finalise the sale and transfer ownership to the buyer.
The process involves:
- Confirming that the lender has received the payout and released their financial interest in the vehicle
- Completing and signing the ownership transfer documents
- Lodging a Notice of Disposal with Service NSW after the sale is completed
- Keeping copies of all documents related to the transaction
Submitting a Notice of Disposal is an important step. It notifies Service NSW that you are no longer responsible for the vehicle and helps protect you from fines, toll charges, and other liabilities incurred after the sale.
A Few Extra Tips Before You Sell
Be Honest About the Outstanding Finance
Let potential buyers know if there is still financing attached to the vehicle. Since buyers can check the PPSR themselves, being upfront from the beginning helps build trust and reduces the risk of delays during the sale process.
Know Your Payout Figure Before Setting a Price
Before advertising your car, find out exactly how much is required to pay off the loan. This will help you understand how much you need from the sale and determine if the expected sale price will cover the remaining finance.
Consider the Timing of the Sale
If your loan is close to being paid off, it’s better to wait until the finance is cleared. Selling a vehicle with no outstanding finance can simplify the process and give you more flexibility when negotiating with buyers.
Keep Records of Everything
Save copies of all important documents, including the payout letter, proof of loan settlement, transfer paperwork, receipts, and your Notice of Disposal. These records provide evidence of the transaction and can help if there is a dispute about the sale, ownership transfer, or loan payout after the vehicle has been sold.
Conclusion
The most important part of selling a financed car is making sure the loan is paid off correctly. Once that is taken care of, the rest of the sale follows much the same process as any other vehicle.
If you are looking for a fast and hassle-free way to sell a financed vehicle, our team at Scrap Cars Syd can help. We offer cash for cars in Sydney and make the process as simple as possible.
Call 1300 356 697 today for a free quote, or complete our online form and a member of our team will get back to you. We also offer free car removal in Sydney and can help guide you through every step of the sale.
