You’d think selling a car is a pretty straight forward process, unless of course you have finance outstanding on it. And if you do, it’s time to listen up!
It’s pretty common to buy and sell second hand cars with finance owing on them, in the same way that you’d expect to take on a mortgage when you buy a new property.
Millions of Australians actually buy and sell second hand cars every year so it’s no surprise that some vehicles will still have finance outstanding on them.
Seller and buyer beware
It’s important that you’re completely honest with the buyer about the amount of finance still outstanding. You should avoid hiding any information from them at all – this could seriously raise alarm bells and will most likely result in them not trusting you and walking away from the sale.
You also need to check the terms and conditions of your car loan. In some cases, you may be required to pay the loan off in full before you sell the car.
It’s important that you are 100 per cent confident that you are within your right to sell the car with finance outstanding as failing to make these checks could get both you, and the new buyer into difficulty.
Understanding whether your car is collateral for the loan is also essential when you’re selling a car with finance outstanding. In some cases, you won’t be able to sell the car before the full loan term amount has been paid back.
According to finance broker Positive Lending Solutions, there are three must-do things before selling a car with finance outstanding:
- Check your paper work: Make sure that you know exactly how much money is still outstanding on your car before you start the selling process. You need to look at your loan documents carefully and consider how much has been paid back and how much is still to pay. You’ll also need to work out how much the new buyer will be paying in interest and fees for the remainder of the car finance.
- Speak to your lender: Ask them whether there are early repayment fees that you may need to pay, and speak honestly and accurately about your plans for the vehicle. You should not try to gloss over or hide anything from your lender as this could lead to further problems in the long term.
- Be honest. This is the most important thing throughout the process of selling a car with finance outstanding. Any potential buyer can find out the financial status of your vehicle and they will be extremely worried if they aren’t getting accurate information from you. Being as honest as possible throughout the process will help to reassure them and hopefully see a healthy sale.