Have a car under finance that you’d like to sell? Unsure of exactly how to go about the sale? Well, we’re here to help!
We know that understanding the process of selling a car under finance can seem daunting, especially when you don’t know where to start. However, with the right knowledge and steps, it can actually be a straightforward task. Understanding the intricacies of car finance and how it affects the sale process is crucial. This guide will walk you through everything you need to know to sell your financed car confidently.
Secured vs. Unsecured loans
When purchasing a car with a loan, it’s important to understand how that loan is structured. Loans can be either secured or unsecured, and this distinction plays a significant role when selling a car that is still under finance.
Most car loans are secured loans, meaning the car itself is used as collateral. This gives the lender the right to repossess the vehicle if you fail to make payments. The advantage of secured loans is that they often come with lower interest rates due to the reduced risk for the lender.
Unsecured loans, on the other hand, do not use the car as collateral. This means you can sell the car without needing to pay off the loan immediately, though you must continue to make loan payments. Unsecured loans typically come with higher interest rates, reflecting the increased risk to the lender. Knowing the type of loan you have will inform your approach to selling the car.
What encumbered means
When a car is under finance, it is considered encumbered if there is an outstanding loan against it. This means there is a financial claim on the car by the lender, but it doesn’t mean the car can’t be sold. Selling an encumbered car requires addressing the outstanding loan before ownership can be transferred to the new buyer. This is a crucial step in ensuring a smooth transaction and avoiding potential legal issues.
Steps to take before selling
When selling a car under finance, it’s essential to understand the steps involved and the options available to you. At Handy Finance, we provide tailored solutions depending on your specific situation, ensuring a smooth process. Here’s what you need to know:
Open communication is key
If you’re planning to sell your vehicle, it’s important to communicate openly with us about your intentions. Each case is assessed individually, taking into account the security value of your car, the remaining loan amount, your payment history, and other factors. This personalised approach allows us to find the best solution for your situation.
How the process works
Once you’ve informed us about your plan to sell your car, we will review your account and determine the best course of action. There are several options available, such as payout letter for the buyer, refinancing, or in some cases security swap. It’s important to remember that each scenario is different, and our team at Handy Finance will work with you to assess your situation individually. By maintaining clear communication with us, we can ensure that you receive a personalised solution that aligns with your needs.
Options for paying off the loan
There are several strategies for paying off the loan to ensure a smooth transfer of ownership:
Pay Off the Loan Before Selling: This option provides the most straightforward path. By paying off the loan in full before listing the car for sale, you can assure buyers that the car is free of any financial encumbrances.
Refinance the Loan: This option allows you to replace the existing loan with a new one, potentially with better terms.Instead of paying off the loan upfront, refinancing allows you to extend the loan term, offering more flexibility without requiring immediate full payment.
Buyer Pays Off the Loan at Closing: In this scenario, the buyer agrees to pay the remaining loan balance as part of the purchase process. This requires coordination with the lender to ensure all legal issues are addressed, but it can be an attractive option if the buyer is willing.
Making the sale
Once you have a plan in place for paying off the loan, it’s time to focus on the logistics of making the sale.
Honesty is key
Throughout the selling process, maintain honesty and transparency with potential buyers. Disclose all relevant information about the car’s financial status and any outstanding loans. This honesty helps build trust with buyers and ensures there are no surprises that could derail the transaction.
Follow lender instructions
Adhering to your lender’s instructions is crucial for a legal and efficient sale. Ensure all necessary paperwork is completed accurately and promptly. This includes any required forms, payoff statements, and legal documents necessary to transfer ownership. Following these instructions helps prevent any complications or delays in the sale process.
Keep track of paperwork
Proper documentation is essential during the sale of a financed car. Keep detailed records of all communications with your lender, potential buyers, and any third-party facilitators. Important documents to keep include the payoff statement, bill of sale, and any receipts or confirmations related to the transaction. Having these documents on hand can help resolve any disputes or questions that may arise after the sale.
Selling a car under finance may seem complex, but with the right approach and understanding, it can be a smooth and successful process. Whether you need guidance on paying off your loan, navigating requirements, or understanding the financial intricacies involved, the Handy Finance team is here to help.
Don’t hesitate to contact us for any assistance or questions you may have. Reach out to Handy Finance today, and let us help you make your car-selling experience as easy and stress-free as possible.
Approvals are subject to Handy Finance’s credit criteria and responsible lending requirements. Fees, charges, terms and conditions apply. Finance provided to approved applicants by OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669, trading as ‘Handy Finance’ holds Australian Credit Licence number 488228 and is a member of the Australian Financial Complaints Authority (AFCA). The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, we recommend that you consider whether it is appropriate for your circumstances. We recommend you obtain independent advice before acting on any information in this article.
