Buying a used car privately always carries some risks. Simple checks online can give you a complete and accurate picture of the vehicle’s history, including any third-party financial interests or money still owing on it.
Buying an encumbered vehicle is legal, but there are some big-time considerations to make before you decide to go ahead with the purchase.
How to check if a car has finance owing on it
It is the buyer’s responsibility to check that the vehicle is free from unpaid debt.
Before you buy a second-hand vehicle, check the Personal Property Securities Register (PPSR) to see if the vehicle has outstanding money owing on it.
The PPSR certificate will act as proof of clear title for 24 hours.
What happens if I buy a car with an outstanding finance amount without checking?
Private sellers are not obligated to disclose if there is outstanding finance on the car, resulting in many buyers being unaware of what they are getting themselves into and a high risk of financial loss.
Despite being sold to a new owner, the finance company that issued the loan still has a financial interest in the car and a legal right to claim money on your insurance policy. In the event of a claim, your insurance company is likely to pay out the finance company – not you.
There is also the risk that if the remaining finance is not paid out, the interest holder may seek to repossess the vehicle from you to recover costs. You will not be compensated in this situation, and you will have lost the money spent purchasing the car.
Buying a car with finance remaining?
If you do your due diligence beforehand, there’s no reason why buying a car under finance should be a difficult process. It’s important, however, to make sure that when you sign our name to the bill of sale, there is no money left owing against the car.
You can request the seller pay off any finance before you proceed with the sale, but make sure to recheck the PPSR before going ahead.
If the seller has been upfront with you and is planning to use the sale proceeds to clear any finance owing, ensure that you have the seller contact their financier to request a letter, sent to you directly, with a dated payout quote and the exact amount of finance owing.
To ensure that the car is yours and free, you can arrange for two payments at the time of transfer. One to the lender to clear any finance, and another (with the left-over money) to the seller. The financier can then update the PPSR and proceed with the sale.
Buying from a licensed dealer or auctioneer
When buying a second-hand vehicle from a licensed motor dealer, they must guarantee a clear title. This means that you can be certain the vehicle does not have any unpaid debt attached to it. However, if you have any doubt, you can always do your own check through the PPSR to confirm.
Deal with someone you can trust
The Motor Trades Association of Queensland (MTA Queensland) is the peak body representing the interests of employers in the retail, service, and repair sectors of Queensland’s automotive industry. Look for members displaying the MTA Queensland logo to provide reassurance that you are dealing with someone you can trust.
Find an MTA Queensland member HERE.
3 February 2022
Please note the information contained on this page is general in nature and does not take into account your specific needs or circumstances. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.