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Can You Sell a Financed Vehicle?

14 January 2022

Can You Sell a Financed Vehicle?


Many kiwis purchase their vehicles on finance by borrowing money from a lender. This is a great way to be able to buy a new car so you can continue getting around without having to save up thousands of dollars first. You can then just pay off the loan over time in regular instalments.

However, if you have a financed vehicle that you’re still paying off but you decide you want to sell it, you might not be sure whether this is possible or not.

So, Can You Sell a Financed Vehicle?
In a nutshell, the answer is yes – you can legally sell a financed vehicle. Whether you want to sell privately to another individual, to a dealership, or trade-in the car, you are allowed to do this. However, the way you do it will depend on the type of loan you have.

Types of Loans
Before you sell a car that you have finance for, you first need to know what type of loan you have. Look back at your loan documents or contact the lender to find out which of the following loan types apply to your situation.

Secure Car Loan
If you have financed a car, it’s most likely that you have a secured car loan. With this type of loan, the lender holds the car as security. If you don’t end up paying back the loan in full, the lender can take the car back to recoup its losses. You don’t own the car outright until you have fully paid off your loan.

For the person to whom you sell a car with a secured loan attached to it, they are taking on a considerable amount of risk. While you can indeed sell the car, if you don’t pay off the loan, the buyer of the car may have it taken from them. You’ll have to be upfront with the buyer that the car is used as security on your loan and probably won’t be able to find someone to purchase the car for this reason.

Realistically, you will have to pay off the loan before you can sell the car, so the buyer is not left with the risk of losing the vehicle. You could do this by using the money from the sale of the car to pay off the loan, or they could pay off the loan for you as their payment for the vehicle.

Regardless of how you do it, you will need your lender’s permission for the sale to occur.

Secure Personal Loan
A car is not the only type of security you can put up against a loan. You may have taken out a secured personal loan but put up something else as security, such as a boat or motorbike. In this case, if you fail to pay off your loan, you will still have your car but not the items you put up for security.

There is no issue with selling a vehicle that is not the security for a loan. The buyer takes on no risk of losing the car if you don’t make your payments. Just be aware that you’ll still be making payments on the loan even though you’ve sold the car – unless you use that sale money to pay off your debt.

Unsecured Loan
The final type of car finance you might have is an unsecured loan. This style is far less common, as it doesn’t offer a lot of protection to the lender. An unsecured loan is simply a loan of money without anything put up as collateral.

Again, as the car is not used as security for this type of loan, you can sell it with no strings attached.

Other Options for Selling a Financed Vehicle
If you really want to sell your financed vehicle, here are a few ways that you can change your loan to make this more feasible.

Refinancing
If you still need the loan but don’t want the car to be the security for it anymore, you may be able to apply for refinancing. This way, you could put up different collateral against the loan, enabling you to sell the car more easily.

You will need to speak with your lender about this option and see if it could work for you. It’s also a great choice if you currently have debt with multiple different lenders and want to combine it, so you are just making one regular payment instead of many.

Use Savings
You’d be surprised how many people have loans but also money in their savings accounts. If you have enough savings to pay off your loan, this is an easy and quick way to detach the car from being security for a loan, enabling you to sell it.

Apply for a Personal Loan
Another option is to apply for a personal loan that doesn’t use your car as security. That way, you can use the money to pay off the secured car loan and sell your car free and clear.

While this option means you still have debt you need to repay, that loan is no longer attached to the vehicle, making it much easier to tell it.

Stadium Finance Car Loans
If you’ve successfully managed to sell a car and now you’re looking for a new ride, you can apply for a new car loan with Stadium Finance. We can get you into your new set of wheels in no time, with decisions made on car loans within 24 hours of application.

Alternatively, if you want to refinance your current loan, get in touch. We may be able to help you by offering you a loan that doesn’t hold your car as security. Whichever option you choose, we’re here to help.

We are a finance company that kiwis trust to offer no-hassle car loans at reasonable interest rates. Our friendly, helpful team can help you with all of your queries about car loans. Contact us to find out how we can help you today.

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