Buying guide
What if there’s money owing on the car?
Car owners must disclose whether there’s any security interest hanging over the car.
Under the terms and conditions section of their listing, car owners must disclose whether there’s any security interest hanging over the car. If the owner does disclose this, then the amount owing should be paid off before you take ownership of the car.
Motor Vehicle Traders are also required to disclose any debt owing in a Consumer Information Notice (CIN), which should be displayed in the window of the car. Without disclosure, the car dealer will be liable for the debt if you buy your car from them.
Do your homework or pay the price
If you have bought the car privately and ownership has already been transferred to you, you, as the official new owner, could become liable for the costs. Legally, if the seller defaults on their payments, you will be considered liable, and the private loan provider has the right to repossess your car to pay off the outstanding loan.
One form of damage limitation is to contact the seller immediately to see if they can work out the loan payments with the provider before repossession occurs. Alternatively, you should inform your insurance company and see if they are able to assist.
Vehicle Information Reports
The best way to avoid future complications is by getting a Vehicle Information Report (VIR) from MotorWeb. This report will instantly show you if there’s any money owing on the car. If outstanding debt is confirmed, the seller must provide you with confirmation from the lending provider detailing the exact outstanding amount.
If the VIR shows money is owing, and you still want to buy the car, but the seller needs your payment to settle the loan, you should arrange to pay the finance company directly yourself. Do not rely on the seller to do this. You would then pay any remaining amount to the seller.
The legal situation
When the borrower (the original owner of the car) fails to pay back the money they borrowed, the lender has the right to repossess and sell the car to recover the amount they are owed.
This is possible because the lender's registered legal claim means they can repossess the vehicle even if it has been sold and now has a new owner.
Critically, lenders are not responsible for ensuring that their borrowers inform a new buyer about the lender's security interest in the vehicle.
One approach to limit the damage is to immediately contact the seller to see if they can settle the loan payments with the provider before repossession occurs.
You should also inform your insurance company to see if they are able to assist. If you cannot solve your issue directly with the seller, you can take the matter to the Disputes Tribunal.
Steps for paying directly to a finance company
- Ask the seller to request a settlement statement from the secured party (finance company). Make sure you are witnessing the original document. The settlement statement will state the amount required to repay the loan in full but will only remain valid for a short time.
- Check the financing statement number on the settlement statement matches the financing statement number on the security against the vehicle you are checking. You should be able to view this number in the VIR as well.
- Make two payments: one to the secured party (finance company) to repay the loan in full (the settlement figure), and the other for the remainder of the agreed purchase price to the seller. Ensure you reference the financing statement number when making a payment to the secured party.
What to do if the car you're buying has finance on it?
Knowing the debt status of the car you are looking to buy is the key to avoiding stress, heartbreak, and financial pain. Performing your due diligence is vital to avoid buying a car with money owing and ensuring you are not the one left picking up the bill. You should check the Personal Property Securities Register (PPSR) to confirm if there is any outstanding debt on the vehicle.
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