Buying a car with finance is a common way to find the perfect car for you. But what happens when it comes time to sell your car that you're still making payments on? Many people often wonder about the process of selling a car that's under finance. In this blog post, we're going to dive into the process of selling a financed car in Australia, discussing the steps, potential challenges, and key considerations.
How does car finance work?
Before we look into the details of selling a financed car, let's recap what car finance is and how it works. Car finance is a common way that many Australians are able to purchase vehicles without making an upfront lump sum payment. Instead, they enter into an agreement with a lender, usually a bank or a financial institution, to borrow money for the vehicle. This is then paid back in regular instalments, often over a fixed term.
Can you sell a financed car?
Yes, you can sell a car that is under finance in Australia, but it's important to follow certain steps to make sure you’re meeting any legal or technical requirements to ensure a smooth process for both you and the buyer. Here are the key factors to consider:
- Find your payout figure: Before listing your financed car for sale, you need to contact your lender to request a payout figure. This figure represents the remaining balance on your loan, including any outstanding interest and fees. It's important to know this amount to accurately calculate how much you need to sell the car for in order to cover your remaining debt.
- Choose the right price: Given the payout figure, you'll need to set a selling price that allows you to cover your remaining loan balance. If your car's market value is higher than the payout figure, you can use the surplus as a down payment for your next vehicle or keep it as cash.
- Transfer of ownership: When you find a buyer, the process of transferring ownership can be a bit more complex than selling a car outright. The buyer has a few options: they can pay you the agreed-upon price, you can use that money to pay off the remaining loan balance, and then transfer the ownership; or the buyer can obtain their own finance to cover the purchase.
- Release of Security Interest: Once the loan is fully repaid, the lender will provide a "Release of Security Interest" statement. This document confirms that the lender no longer has a claim on the vehicle, and the new buyer can take full ownership.
What to consider when selling your financed car
Selling a financed car comes with its fair share of challenges and considerations:
- Negative equity: If your car's market value has depreciated significantly and is lower than the remaining loan balance, you'll have negative equity. In other words, you’ll owe more on the remaining loan than you make from the sale of the car. In this case, you'll need to cover the difference when you sell the car, so it’s important to think carefully about whether now is the right time to sell!
- Early termination fees: Some lenders might charge early termination fees or penalties for paying off the loan early. Make sure you review the terms of your loan and understand the potential associated costs before selling.
- Buyer financing: If the buyer is obtaining finance themselves, they'll need to go through the same approval process you did. In some cases, delays or rejections in their financing can complicate the sale of your car. When you sell through We Buy Cars, you don’t need to worry about the buyer’s finance situation! Once we have an agreed upon sale price, you’ll receive your payment within a couple of days.
- Legal requirements: Adhering to legal requirements is crucial to ensure a smooth sale. Both you and the buyer need to complete the necessary paperwork accurately to avoid potential legal issues. The team at We Buy Cars can help you with the necessary paperwork to ensure you feel confident with the sale of your car.
So, can you sell a financed car?
Selling a financed car in Australia is indeed possible, but it requires careful planning and attention to detail. By obtaining the payout figure, setting the right price, involving the lender, and adhering to legal processes, you can navigate the process successfully. Remember to consider challenges such as negative equity and buyer financing, and always consult with professionals if you're unsure about any aspect of the process. Selling a financed car to a buyer like We Buy Cars helps to alleviate the stress and potential challenges, so get in touch with us today to start the process!