How do you sell a car under finance?

Looking to sell your car and pay off the finance? Here’s what you need to know.

There’s no real secret to getting the best price when selling your old car, other than having a great car and a good buyer. However, there are a lot of problematic possibilities.

Having outstanding finance owing on the car you’re trying to sell is one of them. This guide will take you through how to sell an encumbered vehicle.

Can you sell a car that is under finance?

Yes, you can sell a car that is under finance, but there are two big problems you need to get around:

  • Most people simply don’t want to buy a car with finance owing on it. It’s hard to find a buyer, and much harder to get a good price.
  • Sometimes you must pay off the loan in full before you are allowed to sell the car.

As you can see, solving the second problem also solves the first, so that’s usually the best option.

What do I need to know before I sell my encumbered car?

If you want to sell a car under finance, answering the questions below should help you decide what your options are.

  • How much is still owing on the car? You need to know how much still needs to be paid back on the loan.
  • How will you pay back the lender? You need to keep the lender happy by paying them back the entire car loan in full, plus any early repayment fees and other costs. Before deciding to sell your financed car, discuss it with your lender.
  • How will you satisfy the buyer? Some people may be hesitant to purchase an encumbered car. You either need to make it very clear that any outstanding debt will be the buyer’s responsibility, or that any outstanding finance will be paid off by you.
  • Is the car collateral? If the car is being used as collateral in a secured loan, then you can’t sell it until the loan is completely paid off. If it’s not, then you can sell the car but you are required to disclose any outstanding financing on it.

Trying to sell a car you don't own

If you have a secured car loan with the car as collateral then you can’t sell it until the loan is paid off. What if you can’t pay off the loan without selling the car, but can’t sell the car without paying off the loan?

Polish your smile and brush up your sales skills, because you need the buyer to trust you. Your options are:

  • Be a sales superstar, and sell the car even with outstanding finance. This is tough, and most buyers simply won’t do it because it’s an unwanted cost, it carries extra hassles and it can put them in a vulnerable position.
  • Explain the situation to them. The car is still under finance and they will be purchasing a car under finance. However, you plan on using the money to immediately pay off the loan so they’ll be in the clear. They might take your word for it, but may want to accompany you to the bank or lender so that they can verify the situation and make sure you follow through.

Your options for selling a car under finance

You have a few different options that work well in different circumstances.

  • Sell your car and use the money you get for it to pay off the loan

  • Look at how much you can sell the car for, and look at how much it will cost you repay the loan in full, including any early repayment fees and other costs. This gives you an idea of how much you will make or lose off the sale, and whether it’s really worth it.
  • You should disclose to the buyer that the car has money owing on it. You will most likely need to satisfy them by making it clear you will pay off the loan in full immediately after the transaction.
  • If the terms of your loan do not allow you to sell the car then this option might not be available to you. The exception is if the buyer trusts you enough to buy a financed car from you on your word that you will immediately use the money to pay off the loan. Here you can make the trade, pay off the finance and then make the sale official after that. Only do this with the approval of your bank or lender

Advantages: This option is good for when money’s tight, and it’s an efficient way of recouping expenses. You may also be able to make a profit, but it’s good for when you don’t plan on getting a replacement car.

Disadvantages: You have to sell the car for enough to repay the loan and it can be difficult to sell a car with outstanding financing.

  • Refinance your car loan

  • This is when you take out a new loan with more favourable terms and use it to pay off your car loan. You will have to pay fees and interest rates when opening the new loan, and there will be potential charges when closing down the old one. Whether this is a good idea depends on the terms of both the new and the old loan.
  • Calculate, as precisely as possible, exactly how much you will save by refinancing your car loan. Consider it, check it and double check it before committing to refinancing.
  • The type of new loan you take out will depend on your situation. If you plan on selling the car as soon as it’s out of finance, or you only have a small amount left to pay off, then a small personal loan might be suitable over a refinancing loan.
  • If you are selling a car under finance, you can also consolidate your debt at the same time to get rid of the debt and sell the car.

Advantages: You can quickly pay off your car loan if you find a good buyer straight away, and you may be able to save some money by switching to a more preferable loan. You’re also able to switch from a secured loan to an unsecured loan so you can sell the car.

Disadvantages: It requires taking out a new loan of which the terms and conditions may not always be more favourable, and it may negatively impact your credit history if you apply for a loan too soon or make several applications for credit.

Compare a range of car loans you can refinance with

Rates last updated December 17th, 2018
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Product Description Monthly Repayment
Latitude New and Used Car Loan
From 6.99% (fixed)
1 to 7 years
Finance a range of vehicles including cars, motorbikes, boats and caravans.
Apply online to finance a new or used motor vehicle and receive a response in 90 seconds. You will receive a competitive tailored rate of between 6.99% p.a. to 14.99% p.a.
IMB New Car Loan
5.89% (fixed)
1 to 7 years
Borrow as little as $2,000 at a competitive fixed rate
Finance a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.
Stratton Finance New Car Loan
From 5.14% (fixed)
1 to 7 years
$457 (for private seller vehicles this fee is $608)
Fixed or variable rates starting from 5.14% p.a.
Apply for up to $100,000 and have up to 7 year(s) to repay. You can use cash or trade in a vehicle to use as a deposit.
Beyond Bank Low Rate Car Loan
From 5.69% (fixed)
1 to 7 years
Offset your interest with a Car Budget Account.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.
RACV New Car Loans
From 5.99% (fixed)
1 to 7 years
Benefit from 5-hour pre-approval.
A competitive rate car loan from RACV with no monthly fees.
Australian Military Bank Car Loan
From 5.71% (fixed)
1 to 7 years
from $100 to $500
You'll receive a fixed rate between 5.71% p.a. and 8.66% p.a. based on your personal credit history
A flexible loan to help you finance a car, motorbike or boat up to five years old. - New Car Loan
5.44% (fixed)
3 to 5 years
Optional balloon payment available to reduce your repayments.
A competitive rate car loan suitable for a new cor used car.
Westpac Car Loan
From 8.49% (fixed)
1 to 7 years
Use a new or used car as security.
A flexible loan thats lets you benefit from a car search tool as well as the option to borrow extra for on-road costs.
St.George Secured Personal Loan - Fixed Rate
From 8.49% (fixed)
1 to 5 years
You'll receive a fixed rate from 8.49% p.a. based on the value of your car
Get a competitive rate and apply for a larger loan up to $80,000 when you attach a new or used car as security to the loan.
IMB Secured Personal Loan
6.89% (fixed)
1 to 5 years
Secure this loan with a car and use the funds for any purpose.
Competitive 6.89% p.a. rate available to all approved applicants. Loan amounts up to $60,000 available.
MyState Bank Secured Personal Loan
From 7.99% (variable)
1 to 10 years
Your choice between secured or unsecured.
Apply for a loan up to $75,000 and benefit from loan terms up to 10 years.

Compare up to 4 providers

  • Pay off the car loan with your own savings or credit card

  • Depending on your savings, this might be the best way to pay off your car loan.
  • Credit card debt may bring higher rates than a personal loan.
  • Good planning can help you keep costs down if you choose to use your credit card. If you can’t meet the minimum repayments, for instance, or if you aren’t able to sell the car quickly enough, it could end up costing you more than other options.

Advantages: Paying the car loan in full from your own savings means no new debt. Alternatively, consolidating debt onto a low or no interest credit card can be advantageous if you know you’ll be able to make the payments.

Disadvantages: Having to dip into your savings.

  • Upgrade your car at a dealer

  • If you want to upgrade your car, many dealers will incorporate the terms of the loan into a trade-in deal, particularly if it’s the same dealer you got the previous car from. Outstanding finance on a car doesn’t mean you can’t trade it in to pay towards a new one.
  • If your car is less than five years old and in good condition, you will probably have few issues getting a reasonable trade-in, on account of the car still being fairly easy for the dealer to resell.
  • The dealer can pay off the lender themselves as part of the conditions of the trade-in, and will often work with you to make it simpler. The more upfront you are about how much finance is on the car, the more they may be able to help.
  • You can also downgrade your car if you’re looking for something more cost-effective going forwards and want more money in your pocket after the trade

Advantages: This can be a good way of upgrading, downgrading or changing your car, and many dealers are happy to work with you to make a fresh sale. You may also be able to get more reasonable rates going forward

Disadvantages: It may leave you with a worse financing deal and it requires you to trade-in for a new car rather than simply selling it.

What do you need to keep in mind when selling an encumbered car?

  • Ideally, you will not need to sell a car that’s under finance. If you plan on selling a car in the future it’s best not to have it under finance.
  • The value of a car can drop considerably in a few short years. Consider depreciation when taking out a car loan and how this will affect your ability to resell the car.
  • Generally your two options are to pay off the loan and then sell the car, or to sell the car finance and all. Your only choice is the first option if you have a secured loan that uses the car as collateral.
  • Most people wouldn’t want to buy an encumbered car, given the choice. If you are selling the car with debt rather than paying it off before selling it, you need to be clear about this as loan ownership is transferred with the car.
  • You should discuss your options with your lender before selling the car. They can help you understand the conditions of your loan and your options, and may also be willing to readjust the terms of the car loan if it might help you to keep it and continue making repayments.

Have more questions?

My car has finance on it. Is it better to sell it privately or at a dealership?

Both options work. You may be able to get a better price selling it privately, but the outstanding finance is more likely to be a headache and turn private buyers away compared to reselling it at a dealership.

What do I need to do before handing over the keys?

Before you actually hand over the car, you should know exactly what’s going to happen to the finance on it. Someone needs to give the lender their money, and both you and the buyer need to know who it’s going to be.

Help! No one wants to buy my car with finance.

If you aren’t upfront about the car having finance, such as when placing an ad, then it might look a bit shady when you only disclose that later. You need to proactively make it clear that you have a plan for repaying the loan.

Can buyers tell if a car has finance on it?

Yes, because you’ll tell them. They can also find out by getting an inexpensive history check of the car, which details whether or not it’s encumbered.

Should I plan to sell a car under finance later?

Ideally, your plans shouldn’t include selling a car while it’s still under finance because you generally won’t end up getting value for money.

Should I get a secured or unsecured car loan? How does this affect resale?

Secured loans that use the car as collateral have better rates than unsecured loans, but will need to be fully paid off before you can sell the car. Unsecured loans have worse rates, but you can sell the debt along with the car.

Picture: Shutterstock

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Car Loan Offers

Important Information*
Latitude New and Used Car Loan

You'll receive a fixed rate between 6.99% p.a. and 14.99% p.a. based on your risk profile
Apply for a loan from $5,000 to finance a new or used car. Flexible repayments and options to finance a classic car. - New Car Loan

You'll receive a fixed rate of 5.44% p.a.
Finance a new car and benefit from features such as fast approval, no ongoing fees and an optional balloon payment.

Stratton Finance New Car Loan

You'll receive a fixed or variable rate depending on the lender you are approved with
Apply for up to $100,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.

Beyond Bank Low Rate Car Loan "Special Offer"

You'll receive a fixed rate of 5.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

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10 Responses

  1. Default Gravatar
    ShaneJuly 1, 2018


    Can I buy the engine out of the car that has finance still owing on it? I wish to put the engine in my car & get it registered.

    • finder Customer Care
      JeniJuly 6, 2018Staff

      Hi Shane,

      Thank you for getting in touch with finder.

      As you are aware, part of registering a car is the documenting its engine details. Make sure there’s no outstanding finance on the car before you transfer the engine to your own car. This is your sole responsibility as the buyer who, according to Australian law, is responsible for ensuring the vehicle is free from any other interests.

      There are some limited circumstances in which vehicles may be driven unregistered. Kindly see your state’s vehicle registration office for more info and further assistance.

      I hope this helps.

      Have a great day!


  2. Default Gravatar
    CoreyJune 15, 2018

    I purchased a second hand vehicle from a car yard dealer last year and have recently tried to trade it in on another vehicle only to find out from the dealer that there is an encumbrance on the vehicle from a previous owner Has the previous yard done something inappropriate as I thought that they did the checks , that’s why I went to a car yard. Wondering what my options may be As the value is now only about $2000

    • Default Gravatar
      ArnoldJune 15, 2018

      Hi Corey,

      Thanks for your inquiry

      When buying a vehicle, especially pre-owned ones, it is the buyer’s responsibility to check everything about the car and its papers. The best thing to do is to check everything that needs to be fixed or worked out with the vehicle before reselling it. Getting the vehicle in a good running condition will definitely increase its resell value which in turn allows you to ask more for it.

      Hope this information helps


  3. Default Gravatar
    DouglasJune 2, 2018

    I need to upgrade to a larger vehicle. When trading in our existing vehicle to a dealership with finance owing, will the dealership payout the rest of the amount outstanding and combine the amount into a new finance for the new vehicle?

    • finder Customer Care
      JoshuaJune 4, 2018Staff

      Hi Doug,

      Thanks for getting in touch with finder. I hope all is well for you. :)

      The answer to your question is it depends on what you and the dealer agree with. You either need to make it very clear that any outstanding debt will be the buyer’s responsibility, or that any outstanding finance will be paid off by you. Moreover, you also need to notify your lender about your plan. By discussing your plan with your lender and buyer, you will most likely have more idea on how to go about selling your car.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!


  4. Default Gravatar
    PaulMay 10, 2017

    I have purchased a car privately, and found out that the car has a financial interest on it. I asked the seller about this and he assured me that the depth had been cleared, as he has had the car transferred into his name for some months, and this was not possible to transfer without the payment being made. I checked with Vic raods and they confirmed the current ownership which was correct. Since I have contacted the financer Co, and they are confirming that money is still being owed, but will not confirm how much, as I was not the current owner. They then went further to ask me who the current owner is??? Obviously they don’t know… Firstly should I give this info to them, and if I purchase the Vehicle, am I able to get the current owner to agree in writing the there are no financial interest owing, and if such will be payable by the Seller, and get him to sign this as a legal doc, to cover myself.

    • Default Gravatar
      LiezlMay 13, 2017

      Hi Paul,

      Thanks for reaching out.

      Since you bought your car privately and don’t have the same protections in terms of warranties, it’s really important that you speak to a lawyer and get advice about it. You may also seek advice from Victoria Legal Aid on this number 1300 792 387 or through their website.

      Meanwhile, you can check on Personal Property Securities Register (PPRS) whether the car is encumbered or not. You’ll need the vehicle number and registration details to get this report. You can also ask the seller for the transfer of ownership documents and registration papers if you haven’t done it yet. You can get more information on buying an encumbered car on our guide on this page.

      I hope this has helped.


  5. Default Gravatar
    SallyMarch 7, 2017

    I’m selling a car that is only 14months old. Do I need to get a road worthy certificate?
    Is it possible to sell my car to a family member who is willing to take over the repayments of my existing loan?

    • finder Customer Care
      MayMarch 12, 2017Staff

      Hi Sally,

      Thank you for your inquiry.

      You can actually sell a car that is under finance. Please note if the general guidelines above for further details. If your family member is willing to take over the repayments, then that would be good. Although you should also discuss your options with your lender before selling the car with regards to the conditions of your loan.

      As for the roadworthy certificate, yes, basically, you would need a safety certificate when transferring registration to a new car owner.


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