Buying a car with finance remaining

You’ve found the perfect car on carsales and are getting down to the purchase but you discover that the seller still has a finance amount remaining on the car. What should you do next? We’ve outlined some key things to consider before moving ahead with your potential purchase. 


What do I do if the car I am interested in is under finance? 

You will need to understand the amount owing on the vehicle and to whom. You should discuss this with the seller.

As a first step, the seller should be able to request written documentation or a statement which confirms the total amount owing to discharge the loan by contacting their finance company or lender. The finance company or lender will typically generate a “letter of discharge”, final payment figure or provide such other documentation to the seller with this information. If you can’t obtain this information from the seller then consider seeking financial advice.

If you do receive this information, it is important to check the date the “letter of discharge”, final payment figure or other documentation was prepared, as the amount owing to the lender can change on a daily basis.

Once you and the seller have agreed on a price for the vehicle, and you know the total amount owing, then it is recommended that you pay the amount owing directly to the financial company or lender wherever possible.


You have agreed to purchase a vehicle for $50,000 and the lender has provided written confirmation that there is $20,000 owing. If possible, you should pay $20,000 directly to the lender. The balance of the sale price ($30,000) should then be paid to the seller.

If the amount owing is higher than the agreed sale price (e.g. $55,000), then the seller should pay the excess amount of $5,000 to the finance company or lender before you pay the agreed purchase price of $50,000.

Once payment is complete, request a letter from the lender confirming that the vehicle is no longer encumbered if possible.


Please see our Selling a Car Under Finance article for more information on what sellers should do in these circumstances.

You will need to talk to the seller about how they plan on going about paying off their finance. Once you have made a deal you are both happy with, you can proceed with the sale. Please see our  for more information on what sellers should do in these circumstances. 


What if I buy a car with an outstanding finance amount without checking? 

If you buy a car with an outstanding finance amount and the seller did not disclose this information to you at the time of purchase, then you will automatically be responsible for the debt and outstanding payments of the finance contract. You will also be at risk of losing the car if you cannot afford the remaining repayments.  

We encourage all buyers to get a vehicle history report before buying any used car to check the finance status 


Why is a vehicle history report important? 

A vehicle history report provides details of a used car’s history and can help give you confidence and peace of mind to make the right decision when purchasing a used car. It will show whether the car you are interested in buying has any reported finance registered, and by which finance provider. It will also show whether the vehicle has been recorded as written off, stolen, or involved in an accident.


The seller is denying that there is any finance remaining on the car 

If the seller hasn't advised you that there is finance or is denying that there is an outstanding amount remaining on the car where in fact there is, they are either purposefully defrauding you or simply unaware of the finance. In either case, it's best to walk away from this deal. 



Related articles: 

Selling a car under finance 
How do I check the history of a car? 

Any information on this page is provided as a guide only. It is not professional or expert advice and is not a substitute for such advice. The content may not be appropriate, correct or sufficient for your circumstances and should not be relied on as the only reason you do or don’t do anything.
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