When you purchase a car under finance it is not, technically speaking, yours – not until you pay out the loan completely. So if you want to sell the vehicle and it is still under finance, you need to get the finance company’s permission to do so first. The buyer of the vehicle should also run a check with the Personal Property Securities Register (PPSR) to ensure that it is not financially encumbered.
But what if you have sold the vehicle without the finance company knowing and it is still under finance? Obviously, all proceeds of the sale should be put toward the loan, as to do otherwise would be considered extremely fraudulent behavior. Any amount that you still owe the finance company would become payable and, technically speaking, unsecured. You should note, though, that if you did not get permission to proceed with the sale, the finance company may not automatically give up their claim on the vehicle. If they have not officially released the security on the vehicle they have the right to track the vehicle down and seize it from the new owner, causing them to lose their money. But because you are no longer in possession of the security (ie. the car), your debt with them would now be classed as unsecured.
If you find yourself with a shortfall amount on a vehicle that you have sold and are unable to pay it, you may be able to manage it with a Debt Agreement or Personal Insolvency Agreement. These agreements are government legislated repayment arrangements for unsecured debts, and they allow you to repay your creditors what you can comfortably afford whilst protecting you from further recovery action from them.
For more information on different types of debt and your options for managing it, call us here at Debt Free Australia on 1800 462 767. Our consultants have years of experience in all aspects of personal insolvency and will be able to give you accurate and impartial advice on your obligations and any debt relief solutions available to you.