Whether it’s time to trade up or down, or just on-sell your car, having finance owing on it doesn’t have to mean a roadblock to your plans. Before you put it up for sale, though, make sure you know the following ins and outs of selling a car with finance still owing on it.
Quick checklist for selling a car with finance owing in NZ
- ✓ Get your payout figure. The Motor Vehicle Finance team can help with this
- ✓ Check if your loan is secured against the vehicle
- ✓ Run a PPSR check at ppsr.companiesoffice.govt.nz to confirm the security status
- ✓ Disclose the finance to any private buyer. It's a legal requirement
- ✓ Settle the loan at the time of sale or arrange for the buyer to pay the lender directly
- ✓ If trading in at a dealer, they will handle the payout process
- ✓ Complete the ownership transfer with NZTA once the sale is done
How big is your outstanding balance?
Find out from the lender how much money you have left owing on your car loan. Often, it can be hard to keep track of what the balance actually is – you just make your payments as they are due and know the loan will eventually be paid off. But depending on how far through the loan repayments you are, you could be pleasantly surprised.
If it’s a small amount, you may decide to either pay it off now or just wait until the loan is repaid, to save any potential headaches. However, make sure you know the actual amount to repay, as well as the balance – they might be different if there is accrued interest or a repayment fee to factor in.
And of course, if the balance outstanding means that waiting to pay it off doesn’t make sense, there are other steps you can take.
There's an important difference between your loan balance and your payout figure:
- Your loan balance is the amount still owing on your loan at any point in time
- Your payout figure is the exact amount needed to fully settle the loan - it may include accrued interest since your last payment, or an early repayment fee depending on your lender and loan terms
- Payout figures have an expiry date - usually around 30 days - so request it when you're ready to move forward
The Motor Vehicle Finance team can help you request your payout figure and guide you through the next steps. Start your enquiry and we'll do the legwork. Subject to eligibility and lender criteria.
What if my car is worth less than I owe?
This is called negative equity - or being 'upside down' on your loan. If the sale price doesn't cover your payout figure, you'll need to make up the difference from your own pocket, or in some cases roll the shortfall into a new loan if you're upgrading. It's worth knowing this number before you agree on a sale price.
Selling a car with finance owing on it
Perhaps the loan you took out to buy your vehicle isn’t actually secured against the vehicle anyway, or maybe it’s secured against something else. In this case, selling the car is relatively simple, you can sell it like any other item you own that is finance free.
However, if the lender has used your car as security, there are some steps you will need to take before you can sell the vehicle.
The best way to confirm whether a security interest is registered is to check the Personal Property Securities Register (PPSR) - the official NZ government register where lenders record their security interest in a vehicle. You can check at ppsr.govt.nz for $3. If your lender has registered their interest, it will show here. Any buyer can also check this before purchasing - so it's worth knowing what shows on your vehicle before you list it for sale.
Private sale
If you’re trying to sell privately, you will need to tell the potential purchaser that there is money owing on it. With money owing, the lender retains the right to take the car back if you stop paying your loan – which is a big risk for a potential buyer.
In this situation, the buyer might want to pay the lender directly so there is no risk of this, or the lender may not agree to you transferring the car to someone else’s name if you repay the loan.
Here's how a private sale with finance owing typically works in NZ:
- Get your payout figure. The Motor Vehicle Finance team can help with this
- Agree a sale price with the buyer
- The buyer pays the lender directly to settle the loan, or pays you in full and you settle it immediately
- Once the loan is settled, the lender releases the security interest from the PPSR
- You transfer ownership to the buyer with a clear title via NZTA
Your Motor Vehicle Finance adviser can confirm the settlement process with your lender and make sure everything is handled correctly.
Car dealership
Trying to sell your vehicle to another person or a car yard can be challenging when money is still owed, and the car is being used as security.
However, if you want to upgrade your vehicle, you may not actually need to sell it. Depending on the balance owing, you may be able to trade your vehicle in for the next vehicle of your dreams and transfer the loan to a new vehicle.
Keep in mind that this will (most likely) result in you having a bigger car loan, and maybe bigger repayments (or a longer repayment term than what you have left), but in some cases, it might also be the best way for you to achieve what you want.
Here's what to expect when trading in with finance owing:
- Tell the dealer upfront that there is finance owing on the vehicle
- The dealer will request your payout figure directly from the lender
- If your trade-in value is more than the payout, the difference goes towards your new vehicle
- If your trade-in value is less than the payout, the shortfall is usually rolled into the new loan
Be clear about the shortfall scenario before you sign anything. It's a common situation but worth understanding fully.
Struggling to meet your payments?
If you’re struggling to meet your payments, and selling your car gives you the way to get rid of the debt, consider having a chat with Motor Vehicle Finance first. We might have options that will allow you to get back on top of your payments, while still keeping your vehicle.
Get in touch with our Team to get started. We can help understand your circumstances and approach selling your car with all the facts.
Frequently asked questions (FAQ)
Can I sell my car if I still have a loan on it?
Yes - but you need to settle the loan as part of the sale. The most important first step is to get your payout figure and make sure the sale price covers it, or that you have a plan for any shortfall.
What is a payout figure and how do I get one?
Your payout figure is the exact amount needed to fully settle your loan - including any accrued interest or early repayment fees. Your Motor Vehicle Finance adviser can help you request this. Most lenders provide it within one to two business days. Payout figures usually have a 30-day expiry.
What is the PPSR and why does it matter?
The Personal Property Securities Register is the official NZ government register where lenders record security interests over vehicles. Buyers can check whether a car has finance owing at ppsr.govt.nz for $3. If you sell a car with a security interest still registered and the loan isn't cleared, the lender can repossess the vehicle from the new owner.
What if my car is worth less than I owe?
This is called negative equity. You'll need to cover the shortfall yourself, or in some cases it can be rolled into a new loan if you're upgrading. Know this number before you agree a sale price.
Can I trade in a car with finance at a dealership?
Yes. Dealers handle this regularly. Tell the dealer upfront, they'll request your payout figure, and the outstanding amount will be factored into your trade-in deal. If there's a shortfall, it's typically rolled into the new vehicle loan.
Does selling my car automatically pay off my loan?
No. The loan doesn't disappear when the car changes hands - you need to actively settle it using the sale proceeds. Until the loan is cleared, the lender still has a security interest registered on the PPSR.
What happens if I sell my car without telling the buyer about finance?
The lender can repossess the vehicle from the new owner if the loan isn't settled. You also have a legal obligation to disclose finance owing to a private buyer in New Zealand. Not doing so can create serious legal and financial problems.
How long does it take to get a payout figure from my lender?
Most lenders provide payout figures within one to two business days. Some will do it the same day. Your adviser will flag the expiry date when they request it for you - most are valid for around 30 days.
Not sure where you stand with your current loan?
Start your enquiry online or get in touch with the team. We'll assess your situation and work to match you with a suitable lender. Subject to eligibility and lender criteria.
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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion, and seek independent guidance. Motor Vehicle Finance is a trading name of One Partner Limited (FSP403346), which holds a Class 2 Financial Advice Provider Licence issued by the Financial Markets Authority.
