Can I Sell A Car Under Finance In Western Australia? Full Guide

Posted on 06th, Jun 24

If you’ve got a car under finance in Western Australia and need to sell, we’re here to help. Many vehicle owners find themselves needing to sell a financed car which is why we’ve written this guide. The process might seem scary, but with the right information and by following the right steps, it can definitely be an easier process.

selling a financed car

Is It Legal To Sell A Car Under Finance?

According to Armstrong Legal, it’s perfectly legal to sell a car under finance In Western Australia, but you must disclose the financial encumbrance to the buyer according to Australian Consumer Law. Failing to do so can lead to legal penalties if the buyer decides to take you to court. Despite it being legal there are other complications to selling a car in WA under finance that we will go into detail below.*

Is The Car Encumbered?

If your car is under finance, it is likely encumbered, meaning you owe money against it. For example, if you took out a $20,000 car loan to buy your car and still owe $10,000 after five years, your car is encumbered by that amount. Once you pay off the $10,000, you will fully own the car, and it will no longer be encumbered. Until then, the financial institution that lent you the money own the car title.

However, financing a car doesn’t always mean that is is encumbrance. If you used an unsecured car loan, personal loan, credit card, or any other form of finance that is not linked to the car then,  it wouldn’t be considered encumbered. This is because the loan is not against the car  and the lender cannot repossess the vehicle if you fail to make payments.

If your car is not encumbered it makes selling it a lot easier as it will not show up as having money owing on a PPSP check.

Steps to Selling A Financed Car Privately In Western Australia

1. Check Your Loan Agreement

Start by reviewing your loan agreement. It will outline the terms and conditions related to selling the car before the loan is paid off. Some lenders may have specific requirements or penalties for early repayment .

2. Contact Your Lender

Inform your lender of your intention to sell the car. They can provide a payoff amount, which is the total amount needed to clear the loan. This figure is crucial for pricing your car and negotiating with potential buyers. In most instances, you’ll be required to outline to your lender your strategy for settling your car loan prior to its sale. The best case scenario is that you pay off the the full loan with cash to avoid having to disclose the enumbered status of the car.

If you lack the funds to clear your loan, you can typically arrange the sale through your lender. This means that they will directly receive the proceeds from the sale.

3. Get an Accurate Car Valuation

Knowing your car’s market value is essential. Use online tools or get a professional appraisal to determine a fair selling price. If this price is less than your loan payoff amount, you will still owe money to your lender after the sale.

4. Advertise Your Car

List your car on various platforms such as Carsales, Facebook Marketplace and Ebay. Highlight its top features, condition, and if it’s still under finance if applicable. Transparency with potential buyers builds trust and can facilitate a smoother transaction

5. Negotiate with Buyers

If you’ve already paid off the loan then you won’t have to mention anything about finance and negotiate as per usual. However if the loan is still not paid off, be upfront with buyers about the car’s financed status. Ensure that you explain to them the status of the loan and how it will be paid off after the sale. You’ll also have to lower your price expectations due to the increased complications of selling a financed car.

6. Finalise the Sale

Once you have a buyer ensure all paperwork including the Tranfer Of Ownership form is completed correctly to avoid any future legal issues. In the case the the car is enumbered, work with your lender to pay off the loan. Some lenders will arrange for the buyer to pay them directly and  handle the title transfer on your behalf.

Pros and Cons of Selling a Financed Car


  • Debt Relief: Selling the car can help you get reduce your debt, especially if you can no longer afford the payments.
  • Upgrade To Another Car: It provides a chance to upgrade to a newer or more suitable vehicle for your needs


  • Potential Financial Loss: If your car’s value is less than the payoff amount, you’ll need to cover the difference . There may also be additionaly breakaway fees for paying off the loan early as well.
  • Complicated Process: It involves more steps and coordination compared to selling an vehicle that is not encumbered.
  • Lower Selling Price: Due to the complications involved, you’ll have to offer a discount to incentivise buyers.

Alternative Options

If selling the car seems too complex, consider these alternatives:

Sell to a Cash For Cars Company

These companies specialize in buying cars quickly and efficiently, often offering a hassle-free process and immediate payment. If your car is under finance you can speak to our team and they will find the best way to proceed with the sale. Call us on: 0418 532 275 to see how we can help today.

Trade-In: Some dealerships will be willing to handle the loan payoff if you trade in your financed car for another vehicle .

Refinance: If you prefer to keep the  car but want toreduce monthly payments, refinancing the loan could be a viable option. You may also be able to apply for financial hardship considerations based on your personal circumstances.

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