Car Under Finance? How To Go About Selling or Buying It

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If you’re still paying off your car loan, you’re not alone. A reported 20% of Australians use some type of loan to finance their new car. With the average car loan interest rate at around 6.3%, it can take several years to fully pay back this loan and own your car outright. 

What happens if you decide to sell your car before you’ve finished repaying your loan? What if you’d rather buy it outright to stop making payments? The world of car financing isn’t always clear, so you have to be careful to make sure you’re taking the right steps. You have a few options for selling or buying your car if it’s still being financed. In this guide, we’ll describe your options and steps individually. 

Always Check With Your Lender

The first step, no matter your situation, is to check with your lender. You need to know how much you still owe on the car. From there, you’ll know your options. 

The most common way to sell a car under finance, while you’re still making payments, is to first pay off the remaining debt. This usually involves putting any sales proceeds from your buyer towards the loan. Next, you’ll transfer your car’s title to the new owner. 

Your lender can provide you with the most guidance. You need to start by knowing just how much the lender needs in order to release the lien on your vehicle. In addition, enquire about any additional fees, such as a loan prepayment fee or processing fee. These might be more than you think. 

Know Your Car’s Worth

Before you go any further, it’s also a good idea to investigate the worth of your car under finance. You can do online research with third-party services for a quote as to the current value of your car. Drive is a free tool for car valuation, and you can get started online. 

Car values deplete quickly. Sometimes it’s not worth paying a long-term loan on a car that simply doesn’t bring much value. Knowing your car’s worth will help you decide if you should sell or just pay your loan. 

How to Sell a Car Under Finance

So how exactly do you sell your car if you still owe money on it? It’s important to take each step carefully to avoid any issues with your lender. Before you can sell your vehicle, you need to pay off the loan fully. In the best-case scenario, this will happen all at once. 

You have two options:

  • Pay off the loan before selling – The simplest thing to do is to pay off your loan completely before you sell your car. This means you don’t have any outstanding liens against the car, and the title transfer will be a smooth process. This is also most attractive to buyers, and you might even get a better price for the vehicle. 
  • Pay off your loan during or after the sale – If you don’t have the cash to pay your loan prior to selling, you can get what’s known as a “payout letter.” This is a document from your lender explaining how to complete the payment. You can then begin the payment process during or immediately after the sale to remove the outstanding balance. 

If you still owe money on the car, you won’t have a clear title at the time of sale. This could be off-putting to some buyers, so it’s helpful to have a payout letter to prove the amount you owe is what you say it is. Another option is to sell to a dealer, not an individual. Dealers are familiar with auto loans, and they are more comfortable working with you through this process. 

How to Buy Your Financed Car Outright

Rising interest rates on auto loans add up quickly. If you’re tired of paying monthly for your vehicle, it’s a good idea to buy your car. How do you buy a car you already technically own? By paying off your loan. 

Again, this will follow a similar process as above. You’ll need to secure a payout letter from your lender, and then pay this amount. If you’re upside down on your auto loan, you might owe more fees than your car is worth. If this is the case, talk to a debt specialist about your options. From personal loans to debt consolidation, there might be a debt solution that’s right for you. 

The Bottom Line on Car Financing

Car financing can be tricky to escape. While an auto loan helps make cars more affordable, you have to be aware of your options for selling or buying your car under finance. These steps above will shed light on your options. 
For more help understanding your car loan payoff options, contact the experts at Debt Busters on 1300 368 322. We have over a decade of experience helping Aussies get out from under their debts to create a brighter future.


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