Can you sell a financed vehicle?

25/03/2022
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It’s time to sell your car but there’s still some money owing on the loan. Can you still sell it? The answer is yes - but there are a few steps you may have to take first with your lender.

What are your options for financing a car in New Zealand?

QUESTION 1: IS THE CAR HELD AS SECURITY FOR THE LOAN?

Your car loan will either be secured or unsecured.

  • Secured means that it has a security attached to it, that's used as collateral for your loan. This might be the car you bought with the loan, or it might be something else, like a home.
  • Unsecured means that it doesn’t have any security attached to it.

If your car loan is secured against the car, you need to speak with your lender before you sell it.

If your car loan is secured against something other than the car, you can sell it as normal. You’ll still need to pay the loan though.

If your car loan is unsecured, then you can sell your car as normal. You’ll still have the loan to repay, but you don’t have to go through any extra steps.

Examples

Michael wants to sell his car, but he still owes money on it. His car loan does use the vehicle itself as security. He can’t sell it without speaking to his lender first.

Joan wants to sell her car to her brother John, but she still owes money on it. She checks to see if her loan used the car as security. Turns out that it doesn’t, so she can sell the car to her brother with no extra steps. She still has to make the regular repayments until the end of the loan, however. She just doesn’t own the car anymore. John does.

If your car is secured against the car, you need to speak with your lender before you sell it.

 

QUESTION 2: HAVE YOU INFORMED YOUR LENDER?

If you want to sell a car that is used as security and still has money owing on it, you have to speak with your lender before you go any further.

Your lender will want to have the car fully paid off before it’s sold. This will be described in the terms and conditions with your lender. This gives you two main options:

  • You pay off the car in full. This means paying the balance owing in one go as well as any extra fees and charges (such as prepayment and/or break fees). You can then sell the car as normal.
  • The buyer pays off the car in full. For the buyer to pay off the loan, you’ll need to get a settlement figure from your finance company (e.g. us) and provide that to the buyer. The buyer can then usually settle this using the information on the settlement figure statement. Make sure you ask the buyer to provide proof that the loan has been paid, or call us to confirm. You can then sell the car as normal.

The buyer may also be working with a finance company to get a vehicle loan to purchase your car. If this is the case, their lender should be able to guide them through the process – it can be quite complicated!

 

QUESTION 3: ARE YOU SELLING OR TRADING IN YOUR CAR?

If you are trading in your car rather than selling it outright, you may instead be able to trade it in for a better model and transfer the loan over to the new vehicle. This will increase the size and may also increase the term of your loan. This is also known as a ‘security swap’.

This also requires you to speak with your lender first. Your request will be considered based on your current financial situation and the details of the car you are buying.

And that’s how you sell a car with money still owing on it! If it’s used as security, you’ll need to speak with your lender to settle the loan first. If it isn’t used as security, you can sell it as you like - just remember that you’ll still need to pay off the balance of any loan that still remains.

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