Here's the non-risky way to buy a car with finance still owing

With the overwhelming majority of vehicles in Australia sold under finance arrangements, the likelihood of buying a used car from a private seller that still has money owing is fairly commonplace.

There will always be some risk involved when buying a used car from a private seller, especially if there is still finance owing, but there are some simple steps you can take to protect yourself and ensure the transaction is completed properly.

Also read: 4 tips to avoid the used-car buyer trap

1. Confirm the vehicle has finance owing

While you can always ask the seller if there is still finance owing on the vehicle, it is important to always double check by visiting the Personal Property Securities Register (PPSR). For a nominal fee, the PPSR report will let you know if there is still money owing and whether the car has been written off by an insurance company.

1. Request a payout letter from their financier

A dated payout letter from the seller’s financier will confirm the outstanding balance remaining on the vehicle which is the figure that will need to be paid to finalise any security interest on the car. Regardless of the purchase price agreed with the seller, if the vehicle still has money owing the financier may be entitled to repossess the car.

Also read: Meet the $2m hypercar that can reach 482km/h

1. Settle any outstanding finance

As a buyer there are a few ways to settle any outstanding finance depending on the nature of the transaction. As the buyer, you will be putting your money on the line so it’s important to facilitate this part of the transaction yourself rather than relying on the buyer.

If your agreed purchase price is more than the total finance amount owing, you will need to make two separate transactions.

a. One to the financier for the payout figure

b. Another to the seller for the remainder of the agreed price

If your agreed purchase price is less than the total finance amount owing, you will need to make two separate transactions:

a. One to the financier for the agreed purchase price

b. Another from the seller for the remainder of the payout figure

Also read: The most expensive car in Australia, worth more than $7 million

4. Transfer the registration

This part of the process will require an equal amount of trust from both parties. Either the seller will need to hand over the vehicle before the funds have cleared with the financier, or you as the buyer will need to transfer the funds without being in possession of the vehicle.

There is no way to perform this part of the process without some degree of risk, so ensure you are completely comfortable before proceeding.

1. Confirm the vehicle now has a clear title

After you have completed the transfer of registration, it would be prudent to confirm that the finance has indeed been settled; of which you have two options.

1. Request a statement from the seller’s financier confirming that they no longer carry an interest on the vehicle.

2. Request another PPSR report both to confirm that there is no longer finance owing, and to confirm that the register has updated their information for your new vehicle.

Benefits of buying from a used car dealership

Used car dealerships are required by law to settle any outstanding finance and offer a guaranteed title for all vehicles that they sell, which means you never have to worry about buying a vehicle with money owing from a dealer.

About HelloCars.com.au

HelloCars.com.au is Australia’s first online-only used car dealer which gives Australians a safer, more convenient and better-value way to buy and sell used cars, without the hassle. By operating online without the fancy showroom or pushy sales team, HelloCars.com.au can put more money in your pocket whether you’re buying or selling a used car.