You’ve been using your current car for years, and you’ve decided it’s time to trade it in for something new. But there’s a small issue—your car is still under finance. What do you do then? 

If you find yourself in the situation above, don’t fret because there’s a way out of this problem. Here’s what you need to know when selling your car still under finance: 

Can you sell a car under finance? 

Yes, it is possible to sell your car even if it’s still under finance. The how depends on what type of car loan you have. For secured car loans, it may be a requirement of your loan that you use some of the money you received from the sale to pay off the remaining balance on your loan. You may also have to pay for early repayment or early termination fees in addition to your outstanding balance. 

If you have an unsecured car loan, you could sell the car and continue to make the repayments without issue. Your car isn’t attached to the unsecured car loan and is already under your name. You will have the option to maintain loan repayments or use the funds from the sale to pay the loan off completely.  

How will you know if your car is encumbered? 

A car that is considered encumbered if you owe money against it. This is usually the case with secured car loans. Because you haven’t paid off the loan completely, you technically don’t own the car yet. 

Since the car is attached to the secured car loan, you need to pay it off first to properly transfer everything to the new owner. If you fail to pay the remaining balance on the loan, the car can get repossessed even if you already sold it to someone else. 

Your car isn’t encumbered if you bought it with an unsecured loan, unsecured personal loan, or credit card. The car is under your name already and the lender cannot repossess it even if you fail to repay the loan. 

Is it illegal to sell a car under finance? 

It may be a breach of the terms of your loan agreement to sell your car under finance, and you will have a challenging time selling your car if it is encumbered. Most lenders won’t prevent you from selling your car under finance as long as you pay off the loan balance when you finalise the sale.

If you sell your car while it’s under finance and then not pay off the loan, this is where you’ll face legal trouble. Before putting your car up for sale, talk to your lender about the terms and conditions of your loan. Also, read over your contract carefully to make sure everything is above board. 

How to sell a car under finance 

The car sale process is fairly straightforward even if your car is under finance. Here are some things you need to keep in mind: 

  • See how much you have left on your loan. Check how much you still owe and whether or not you can afford to pay it off. 
  • Figure out the value of your current car. This can help you determine if the sale funds can cover the remaining balance on your loan. 
  • Inform your lender that you’re planning to sell. You may have to notify your lender that you’re selling the car, especially if it’s under a secured loan.  

Selling your car in a private sale 

Selling your car privately with outstanding balance can be difficult but not impossible. As a seller, you have to disclose the fact that the car is still under finance. If the buyer is willing to go through with the sale, you need to transfer the registration of the car and provide proof of sale. 

Trading in your car at a dealership 

For trade-ins, you’ll exchange your current car under finance for a new car under dealership or lender finance. Some dealerships will contact your lender to settle the outstanding loan balance on your behalf and handle the transfer paperwork.  

Ask your lender for help selling your car 

Discuss your plans to sell your current car under finance and see if your lender can organise the sale. This can help you avoid the stress of finding a buyer and the transfer registration documents. 


If you’ve taken out a car loan with, don’t hesitate to reach out when you have questions about your finance options. We’re here to help you get low rates on your next car loan as well!