When people take out a personal car loan or business vehicle finance the loan term is, in most cases, fixed at a set number of months/years. When establishing car loans for our clients, we negotiate the loan terms as best as possible to meet their requirements. All Jade Car Loans have fixed loan terms. However, people can often change their minds regarding how long they want to drive that particular vehicle.
While many do keep the car for the full term of the loan, some may choose to upgrade or changeover to a new car before the end of the loan term. The vehicle may no longer meet the demands of their business, lifestyle or family or they may just aspire to a better, newer model.
When that occurs, the car owner may either sell the car privately or trade it in with the dealer on the new car. When you sell a car while money is still owed on the car loan it is known as ‘selling a car under finance’. The car is subject to a personal car loan or business vehicle finance contract. This may also be referred to as ‘encumbered’. We explain what happens when you decide to sell or trade a car under finance.
Ownership of the Loan
The first thing to realise is that the car loan is attached to the borrower, not the car. If you have a personal loan, you are responsible for that loan. If purchased through a business entity, the business and/or possibly the business owners/directors are liable for the finance contract.
When you sell or trade a car, the loan is not sold on to the buyer. The loan must be finalised by you in some way. The buyer doesn’t simply take on your loan obligations when they purchase your car.
Essentially you are in the position of finalising a loan before the end of the loan term. There are several ways that this situation can play out which we will cover for you.
REVS/PPSR Checks
When buying a second hand car, buyers are strongly recommended to do what is known as a PPSR Check on the vehicle. PPSR used to be known as a REVS check. It is a service provided by several providers where you enter the vehicle registration number into a system and you receive a report which includes details about the registered owner of the car and if the car is under finance. More detailed vehicle history reports can also be obtained which detail if the car is reported stolen and other important information.
If you are organising your low interest car finance through Jade Car Loans, your consultant will handle this for you. Astute buyers, if not all buyers, of used cars, should obtain a PPSR before committing to a purchase.
Personal Secured Car Loans
If you have a Secured Car Loan, perhaps a low doc car loan, and want to trade/sell the car for a new one before the end of the loan term, you will be required to finalise the outstanding amount on your loan. Break fees apply to loans that are finalised before the end of the loan term. You will need to contact your lender and ask for a ‘payout’ figure. That will be the total owed on the loan on that particular day – the outstanding monthly repayments which include interest to that point and any break fees. As interest is calculated usually daily, the payout figure will change over the ensuing days/weeks until the loan is finalised.
The lender will advise how you are to make the payment.
Business Vehicle Finance
Business finance products have the option of a balloon or residual. The payout figure on business car loan contracts will include what is outstanding in repayments, the balloon/residual and any break fees that may be included in the contract. The lender usually advises for how long that payout figure is valid after which time you will need to check in with them for an updated amount.
The lender will advise how you are to make the payment.
Trade-in Process
When you’re trading in a car through a dealer for a new one and you are having your new car financed, paying out any monies on the old car can be handled in several ways, depending on the situation.
Options may include:-
- The dealer makes you a trade-in offer, you can accept that in cash and you pay the loan to the lender.
- The dealer pays part of the trade-in cash directly to the lender to pay out the loan and then gives you the remainder or deducts it from the price of the new car.
- The lender or your Jade Car Loans consultant, can handle paying out the old loan when setting up your new car finance dealer. This would all be sorted through the dealer’s invoice to the lender.
Private Selling
If you’re selling your car privately while under finance, the buyer will usually require you to pay out the loan before they finalise the purchase. If you need the sale monies to finalise the loan, you should be able to make arrangements with the lender for the buyer to pay the money directly on your behalf.
Utilising Your Jade Consultant
It may all sound a bit complicated and a bit ‘depends’, but the process of selling a car under finance is quite streamlined. It happens all the time. If you’re arranging your new no doc car loan or other finance through Jade Car Loans, then it’s not a problem. Your consultant can advise how the process will work, obtain your payout figures, organise both your new cheap car loan, and finalise the previous commitment.
To discuss finance options for a new car and how to finalise the finance on your trade-in, just contact Jade Car Loans 1300 000 003
DISCLAIMER: READERS ARE ADVISED THAT THIS INFORMATION AS PRESENTED IN THIS ARTICLE IS INTENDED FOR GENERAL INFORMATION PURPOSES AND NOT AS FINANCIAL ADVICE. PEOPLE NEEDING FINANCIAL ADVICE ARE RECOMMENDED TO CONSULT WITH A FINANCIAL ADVISOR TO ASSIST IN REGARD TO THEIR INDIVIDUAL CIRCUMSTANCES. INFORMATION AND CONTENT IN THIS ARTICLE MAY HAVE BEEN SOURCED FROM A RANGE OF PUBLICATIONS AND INFORMATION RESOURCES. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, OR MISINTERPRETATION OF OTHER ISSUES AROUND THE PRESENTATION.
