How to sell a car under finance


Financing a car has become a popular alternative to paying for one with cash outright. While car loans can give you more financial freedom, there can be potential issues if you decide to sell your vehicle while you still owe money through finance. At AutoFlip, we specialise in helping people sell their car when under finance, and we've put together this guide to help you understand the in's and out's of selling your car under finance.  

Understanding car finance and encumbrance

When taking out a new car loan, the vehicle is often used as collateral in the finance agreement. Collateral is effectively property that is secured against the loan that reduces the risk for lenders. 

If the loan is finalised in this way, the car becomes known as ‘encumbered’ or ‘under finance’. This means that the lender holds an interest in the vehicle until the loan is fully repaid.

Can you sell a car under finance legally?

Selling a car under finance is both legal and possible, as long as specific steps are taken by all parties involved. As the seller, it is your responsibility to make sure the process is followed correctly, disclosing to any potential buyers that the car is encumbered by finance. Failing to do so can not only lead to a loss of trust, it may also violate clauses of the finance agreement and have legal consequences. At AutoFlip, we work with sellers to take them through the relevant steps of selling under finance and sourcing buyers from our network of 1,000+ licensed dealers across Australia.

Preparing and Executing the Sale

Preparing a financed vehicle for sale involves several specific steps to ensure the sale is smooth and legal.

Step 1: Obtain a Payout Figure 

Contact your financier and request a payout figure for the amount required to clear the loan. This number should include the remaining loan balance, plus any early termination fees that may be applicable. 

Step 2: Value Your Car

Determine your vehicle’s market value to ensure a fair selling price. This can be achieved through using an online valuation tool, checking for listings of similar cars, or obtaining a professional valuation. 

Step 3: Find a Buyer

List your vehicle for sale to attract prospective buyers. You can use AutoFlip’s easy-to-use platform to assist you, or you can create a private listing. Remember to be upfront with potential purchasers about the car being under finance. 

Step 4: Negotiate the Sale 

Come to an agreement with the buyer on the sale price of the vehicle. In your negotiations, remember to factor in both the car’s market value and the payout figure of your finance agreement. 

 Clearing the finance and finalising the sale

Once you’ve found a buyer for your vehicle, there are a number of steps still to follow when selling a car under finance. 

Step 1: Clear the finance

The payout figure must be cleared once the sale price has been agreed upon. If the sale price covers the payout figure completely, you can pay your financier directly. If there is a shortfall, it is your responsibility as the seller to pay the difference. 

Step 2: Transfer ownership

After clearing the finance, you’re able to transfer ownership of the vehicle to the buyer. Collate all paperwork and fill out all necessary documents relating to the sale. Remember to inform the relevant authorities of the change in ownership. 

Step 3: Provide receipt

Always provide the buyer with a receipt to show that the car is no longer legally yours, and to allow them to easily register it in their name. Include details of the car, including its make, model, VIN and the terms of the sale, such as price, finance status and selling date. 

Whether your car is under finance or not, AutoFlip can help you sell it quickly and for the best price

Selling a car under finance requires planning and transparency to ensure a smooth sale. Communicate clearly that the car is under finance and pay off the loan before transferring ownership to the new owner to ensure the car’s history is not impacted. 

At AutoFlip, we help simplify the process of selling a car, especially when it’s under finance. AutoFlip can assist the successful buyer and your finance company to complete the transaction without hassle.

We’re committed to providing a user-friendly experience through our online platform, and we have decades of expertise in the automotive market. Our team is always ready to assist with selling your car, regardless of whether you owe money through finance or not.