If you’re thinking about selling your car but it’s still under finance, you’re not alone. This is a question we hear all the time from people who are upgrading, downsizing, or just trying to get out from under a loan. And the short answer is: yes, you can sell a car that’s still under finance — but it comes with a few important conditions.
Let’s break it down in simple terms, so you know exactly what your options are and how to avoid any legal or financial headaches along the way.
What Does It Mean When a Car Is Under Finance?
If a car is “under finance,” it means you’ve taken out a loan to buy it and the lender — usually a bank, credit union, or finance company — has a legal interest in the vehicle. In other words, you don’t fully own it yet. You can drive it and use it, but until the loan is completely paid off, the finance company technically still owns part of it.
That’s why selling it isn’t as simple as handing over the keys and pocketing the cash.
So, Can You Actually Sell It?
Yes, but here’s the catch: you must pay off the outstanding loan before transferring ownership to a new buyer. No exceptions.
Here’s how it usually plays out:
- If you sell the car privately, the buyer will want proof that the car isn’t under finance anymore.
- If you trade it in or sell to a dealer, they’ll often handle the payout directly with your finance company.
- If you’re going through a car removal or cash-for-cars company, they’ll typically check the car’s finance status before making an offer — and may help guide you through the process if it’s still under loan.
What Happens If You Sell Without Paying Off the Loan?
Here’s the thing: it’s illegal to sell a car with an active finance agreement without disclosing it. The vehicle is what’s called encumbered, and that means the finance company can legally repossess it — even from the new buyer — if payments aren’t made.
If you try to sell it privately without clearing the loan first, you could land in serious trouble. It’s not just unethical — it could be considered fraud.
Step-by-Step: How to Sell a Financed Car
1. Check the Payout Amount
Contact your finance provider and ask for a payout figure — this is the total amount left to clear your loan, including any interest or early termination fees. This number usually comes with an expiry date (often valid for 7–10 days).
2. Find Out the Car’s Current Value
Get a valuation from multiple sources — dealers, online tools, or a cash-for-cars service. If your car is worth more than the payout figure, great — you’ll have money left over after the loan is cleared.
If it’s worth less, you’ll need to cover the difference out of your own pocket.
3. Choose How to Sell
- Private sale: You and the buyer can agree that the buyer pays the lender directly to settle the loan, and any remaining amount goes to you.
- Trade-in or dealer: They usually handle the finance payout for you, and deduct it from the offer price.
- Cash-for-cars or removal company: Some, like us, can offer same-day removal and help you sort the finance, but again — the loan must be settled first.
4. Clear the Loan and Transfer Ownership
Once the finance is paid off, the lender will release the car from its encumbrance (you’ll often receive a letter or digital confirmation). After that, you’re free to legally transfer ownership to the new buyer.
Real-World Example: How It Works
Let’s say you owe $6,000 on your car loan and the car is currently worth $7,500. You find a private buyer willing to pay the full value. You contact your lender, get a payout figure of $6,100 (including some early termination fees), and arrange for the buyer to pay that amount directly to the lender. The remaining $1,400 goes to you.
The loan is cleared, the finance company releases the vehicle, and you hand over the keys and transfer paperwork — clean and legal.
What If You Can’t Afford to Cover the Difference?
If your car is worth less than what you owe and you can’t afford to make up the gap, you still have options:
- Refinance the shortfall with your lender or a personal loan.
- Trade the car in at a dealership that’s willing to absorb the negative equity (though this can mean rolling debt into your next car loan — be cautious).
- Speak to a car removal company that offers assistance in these situations. At our company, we’ve helped sellers deal with encumbered cars and walk away without hassle — especially when the vehicle isn’t in great condition.
Is It Worth Selling a Financed Car?
It depends on your situation. If your monthly payments are too much, or the car is giving you more trouble than it’s worth, selling could give you some breathing room. Just make sure you’ve done your homework and understand the numbers.
We’ve had plenty of customers who thought they were “stuck” with a financed car, but ended up with a clean slate (and even a bit of cash) after working through the process.
Worth Knowing Before You Sell
- Always check if the car is under finance using the PPSR (Personal Property Securities Register).
- Never take someone’s word for it — always confirm the status with the lender or an official check.
- If the buyer asks whether the car is financed, always be honest. Transparency builds trust and avoids future legal issues.
Here’s the Bottom Line
Selling a car that’s still under finance isn’t impossible — it just takes a few extra steps. As long as the loan is settled before the car changes hands, you’re all good. The key is communication: with your lender, with your buyer, and with whoever’s helping you sell the car.
If you’re not sure where to begin, we’re always here to help. At Brighton Car Removals, we’ve worked with all kinds of sellers — from those with clean titles to those still paying off a loan. We’ll walk you through the process and make it as stress-free as possible.
Don’t Let a Loan Keep You Stuck
Your car shouldn’t feel like a financial trap. Whether you’re ready to move on or just looking at your options, knowing how to sell a financed car gives you control. Take it one step at a time, ask the right questions, and make sure the paperwork lines up — the rest will fall into place.
If you are in Port Melbourne, and looking for a car removal service, this is the best way to visit us.
Brighton Car Removals
100 Church St, Brighton VIC 3186
www.brightoncarremovals.com.au