If you’re wondering, “can you sell a car on finance?”, you are not alone! Many sellers often think the process may be too difficult or hard to navigate, but as long as you are transparent with potential buyers there is no reason why you cannot sell a car that you have a loan on. To assist you we have put together some handy tips below that will help you understand how to sell a car on finance.
Contact the Lender
If you’re looking to sell a car that still has finance owing on it, the first step is to contact your lender to find out the remaining balance on your loan. This will give you an idea of how much you need to sell the car to be able to pay off the loan balance. Can you sell a car on finance is likely a question they get asked often, so it is also a good idea to have a general discussion with the lender to inform them of your plans to sell the vehicle and determine any additional requirements that need to be considered.
Conduct Market Research And Determine A Fair Price
Once you have an understanding of your outstanding responsibilities to the lender, you should research the market to see what similar cars are selling for in your area. Based on your research and the condition of the car, you should be able to determine a fair price that you are willing to sell the car for. Be realistic and reasonable.
Be Transparent With Potential Buyers
When selling a car on finance, it’s important to be upfront with potential buyers about the financing agreement. You should disclose any remaining balance on the loan and any other relevant information relating to the purchase of the vehicle. It is common practise for buyers to conduct a PPSR check on a second-hand vehicle before purchasing to see if it has a security interest recorded against it, so it is important to be honest about any finance owing from the beginning.
Once you’ve considered the above steps, you’re ready to start to selling process. Keep reading below for an example showing how to sell a financed car.
How To Sell A Car On Finance
Now let’s have a look at an example of how to sell a financed car. Let’s say two years ago you took out an unsecured loan on a 2018 Volkswagen Polo. Currently you still owe $10,500. After conducting research on cars of a similar age, condition and make in your area, you have decided a fair price to advertise for is $18,500. You will be using the proceeds of the sale to pay off the remaining balance.
After showing the car to a several interested buyers, you find a buyer who wants to make an offer. After a brief negotiation you reach an agreed selling price of $17,500, and take a cash deposit of $500.
You will then need to contact your lender to find out the exact amount owed on the loan, as well as any additional fees you may be liable for. A reputable lender will provide you with a pay-out letter stating the amount owed, how long the pay-out letter is valid for, and how to pay the amount owing. The remaining monies owed will have to be paid out before ownership of the vehicle can be transferred to the buyer.
The easiest way to ensure the monies owed are paid off, and provide certainty for each party, is for the buyer to make two payment transactions. One direct to the lender, and a second payment for the remainder of the purchase price direct to you.
Once the lender has received the funds from the buyer, they will provide a statement to confirm the amount owing has been cleared and there is no longer a security hold over the vehicle. You will then need to complete the necessary paperwork to transfer ownership of the car to the buyer. This will typically involve signing over the title of the car and providing any other necessary documentation to complete the sale. The buyer is now free to drive away in their new (second-hand) vehicle, free from encumbrance, and you have a small profit from the sale.
In summary, “can you sell a car on finance?”. Yes, you can. The most important thing is to be transparent throughout the process to both the lender and any potential buyers.
