Still paying off your car loan but ready to sell the vehicle? You can sell a financed car, but you need to deal with the outstanding loan before the sale is completed.
The process is usually straightforward once you know what your lender requires. The first step is to find out exactly how much you still owe, then compare that amount with what your car could sell for.
If you are planning to sell your financed car for cash in Perth, here is what you should know before agreeing to a sale.
Can You Sell a Car That Still Has Finance Owing?
Yes, you can sell a car that has finance owing. However, you need to tell the buyer about the outstanding finance and arrange for the loan to be paid out as part of the sale.
WA Consumer Protection advises sellers to pay out the loan before selling the vehicle. Most lenders will allow a financed vehicle to be sold provided the outstanding balance is paid from the sale proceeds.
The exact process can vary between lenders, so it is important to contact your finance company before agreeing to a final sale.
Step 1: Ask Your Lender for a Payout Figure
Start by contacting your lender and requesting a current payout figure, sometimes called a settlement figure.
This is more useful than simply looking at the remaining balance shown in your banking app. The payout figure tells you how much is required to settle the loan at a particular date.
Depending on your finance agreement, the figure may take into account things such as:
- The remaining loan amount
- Interest or other amounts due up to the settlement date
- Early repayment or break-free charges, where applicable
- Other fees included under your finance contract
Ask your lender how long the payout figure remains valid. If you do not sell the car within that period, you may need an updated figure.
Step 2: Understand the PPSR
The Personal Property Securities Register (PPSR) is Australia’s official register for security interests in personal property. You can check the official PPSR vehicle search guidance to understand what a search can reveal. Secured car loans are one example of an arrangement where a lender can have a security interest over a vehicle.
A PPSR search can show whether a security interest has been recorded against a vehicle. This is particularly important for buyers because an outstanding security interest can create risks if the loan has not been properly settled.
As a seller, the important point is simple: if your vehicle is being used as security for your loan, speak with your lender about how the security interest will be dealt with when the loan is paid out.
You do not need to assume that every finance agreement works in exactly the same way. Check your own loan documents and confirm the process directly with your lender.
Step 3: Compare the Payout Figure With Your Car’s Value
Now you need to compare the amount needed to settle your loan with the amount you could realistically receive for the car.
If the car is worth more than the payout figure
You have positive equity.
For example, if your lender requires $12,000 to settle the loan and your car sells for $16,000, there is $4,000 left after the loan is settled, before any other applicable costs.
If the car is worth less than the payout figure
You have negative equity.
For example, if your payout figure is $18,000 but the car is worth around $15,000, there is a $3,000 shortfall.
In this situation, speak with your lender before agreeing to the sale. You may need to make up the difference yourself or discuss other options available under your finance agreement.
Knowing this figure early can prevent an unpleasant surprise when you are ready to sell.
Step 4: Decide How You Want to Sell the Car
There are several ways to sell a financed vehicle.
Sell to a vehicle buyer
A professional vehicle buyer may be able to help coordinate the sale and loan settlement with your lender. Before accepting an offer, ask exactly how the outstanding finance will be paid and when you will receive any remaining money.
If you are considering this option, you can request a free quote from Cash for Cars Perth before making a decision.
Trade the car in
A dealership may be able to include the outstanding finance when arranging a vehicle trade-in. This can be convenient if you are buying another vehicle, but compare the trade-in value with other offers before making a decision.
Sell privately
A private sale is also possible, but you need to be open with the buyer about the finance owing. WA Consumer Protection specifically advises sellers to tell buyers about outstanding finance and arrange for the loan to be paid out.
Ask your lender how they want the transaction handled rather than relying on an informal agreement between you and the buyer.
Step 5: Prepare Your Documents
Having your paperwork ready can make the sale easier.
Depending on your situation, you may need registration details, service records, finance information, identification and other documents required for the transaction.
You should also contact your lender early so you understand exactly what they require to settle the loan.
For more information about the paperwork involved in selling a vehicle in WA, see our guide to what documents you need to sell your car for cash in WA.
Step 6: Arrange the Loan Settlement
Once you have agreed on a sale price, confirm the settlement process with your lender and buyer.
The process may involve:
- Confirming the current payout figure with your lender.
- Agreeing on how the payout amount will be transferred.
- Paying the required amount to settle the finance.
- Confirming with the lender that the loan has been settled and asking how the security interest will be released, if applicable.
- Receiving any remaining sale proceeds after the finance has been settled.
- Completing the required vehicle transfer process.
The exact steps and timing can vary between lenders, so confirm the details before handing over the vehicle.
For a WA-licensed vehicle, the seller also needs to notify the Department of Transport of the sale within the required timeframe.
What If the Financed Car Is Damaged or Doesn’t Run?
A car does not stop having finance obligations simply because it has been damaged, stopped running or become difficult to use.
If the vehicle is worth less than the remaining loan, you may have negative equity and need to discuss the shortfall with your lender.
If the vehicle is damaged or no longer practical to keep, you can still explore your selling and removal options. The important thing is to find out the loan payout amount first so you know where you stand financially.
Important: Check With Your Lender
Finance agreements can have different terms and conditions. Before accepting an offer, request a current payout figure and ask your lender how they want the sale and loan settlement handled.
If you are unsure about your financial or legal obligations, consider getting independent financial or legal advice.
Ready to Sell Your Financed Car?
If you have a financed vehicle in Perth and want to understand your selling options, you can contact Cash for Cars Perth for a free, no-obligation quote.
Before agreeing to the sale, make sure you know your current payout figure and understand how the outstanding finance will be settled. That way, you can compare the offer with what you owe and make an informed decision.
