Can I sell my car on finance? Yes, here's how

Why the lender gets paid first

A secured car loan gives the lender a security interest in the car, usually registered on the Personal Property Securities Register (PPSR) against the VIN. Until the loan is paid and the registration removed, the car isn't free of it. That's why buyers check the PPSR, and why the payout comes out of the sale money before anyone else is paid.

For sellers: step by step

• Ring your lender and ask for a payout letter (also called a payout quote). It shows the amount to clear the loan, and the date it's valid until. Interest keeps running, so the figure changes daily.
• Check whether you have positive or negative equity: compare the payout with what the car will realistically sell for.
• Tell the buyer or dealer upfront that there's finance on the car.
• At settlement, the buyer or dealer pays the lender the payout amount directly, and pays you the balance.
• Make sure the lender removes the PPSR registration once paid, and keep the confirmation.

Worked examples

Examples only.

ASIC's Moneysmart warns that if you sell a car to clear a loan, the price might not cover the full debt, and you'll still be paying off the loan after the car is gone. Sort out how you'll cover a shortfall before you sign anything.

Selling to a dealer, trading in or consigning

Selling or trading to a dealer: the dealer pays the lender directly and pays you (or credits your trade) the balance. If there's negative equity on a trade-in, ask exactly how it's being handled; rolling it into a new loan means you keep paying for the old car.

Consigning: the dealer pays the lender from the sale proceeds at settlement, then their fee, then you. See how to sell your car on consignment.

Private sale: the safest way is to arrange the payout with the lender and the buyer together, so the buyer's money clears the loan directly.

For dealers: buying or consigning a car with finance

• Ask about finance at the first contact, and capture the lender and an estimate of the amount.
• Run a PPSR search on the VIN. It shows the secured party, not the amount owing.
• Get the payout letter from the seller, or with their written authority from the lender.
• Search the PPSR again on payment day. Anything registered since your first search won't show on the old certificate.
• Pay the lender first, by the method on the payout letter, and the seller the balance. If the payout is more than your price, collect the difference from the seller before you pay.
• Confirm the lender has removed the registration, and keep the certificate and payout confirmation on the car's file.
• For consigned cars, check how your state's trust rules handle payments to a lender. In QLD, trust money can only come out once the transaction is finalised.

Balloon and lease cars

If your loan has a balloon (residual) payment, the payout includes it. If the car is under a lease or novated lease, the lender or lessor may own it outright, so speak to them before you advertise it.

How to sell a car that still has finance

1. Get a payout letterAsk your lender for the exact amount to clear the loan and the date that figure is valid until.
2. Work out your equityCompare the payout with a realistic sale price to see whether you'll receive money or need to cover a shortfall.
3. Tell the buyer or dealerDisclose the finance upfront. They'll see it on a PPSR search anyway.
4. Pay the lender first at settlementThe buyer or dealer pays the payout amount directly to the lender, then pays you the balance. Cover any shortfall before settlement.
5. Confirm the registration is removedMake sure the lender removes its PPSR registration and keep written confirmation.