Have you found a used car you like that’s within your budget, but the owner is still paying off the car loan? What should you do next? Buying a used car with a loan on it can be tricky; there are many things you need to evaluate before making an offer. So, how should you go about buying a car with an existing loan?
If you do your research beforehand and get in touch with a reliable seller, you don't have much to worry about. The process may be as smooth as purchasing a car with a clear title. However, it’s important to read the fine print carefully to ensure you know exactly how much you have to pay for your car and who is responsible for paying the pending loan amount. It could be more convenient to look at certified pre-owned vehicles and choose one within your budget.
What happens if I buy a car still under finance?
In case you buy a car without knowing it is still under finance, you, as the new owner, may become liable to pay the balance amount to the lender. In Australia, the buyer's responsibility is to check all these details and be accountable to pay the debt and outstanding payments.
How to check if a vehicle has an existing loan on it?
You wouldn’t want to invest in a car to find out it has a liability attached to it. To prevent such a shock, you can visit the Personal Property Securities Register (PPSR). The PPSR is a nationwide register that keeps track of the loans held on Australian cars, motorbikes, boats, and more.
At the cost of $2, you can check if there’s an existing loan on the car you’re planning to purchase. You could also choose to check the loan status on the car before you approach the seller.
What to do if I want to buy a car with an existing loan?
The most straightforward option is to have a conversation with the seller. Once the seller has paid off the amount owed on the vehicle, they can transfer the title to you. The seller may not be able to settle the loan fully and may plan to use the money you're paying to close the loan.
If this is how it will be done, make sure you get the documentation from his finance company or bank stating that the loan was paid in full. If you can’t get this assurance, it may be better to err on the side of caution and find another deal.