Can you sell a financed car?

Can you sell a financed car?

Selling a vehicle is usually a simple, straightforward and easy process, but what happens when you want to sell a financed car? This is a common spanner in the works for South Africans; most of whom cannot afford to purchase a car without finance. The good news is that there are a few options for selling a car under finance and it’s not that complicated.

So, to answer the question:  Can you sell a financed car? The answer is, absolutely! 

Some further questions you may be asking include: How can I sell a financed car? Where can I sell a financed car? What if the resale price is less than the outstanding loan amount? What are some of the best options for selling?

Let’s unpack the answers:

Understanding car finance in South Africa

Before we get to the nitty-gritty of selling a car under finance, it’s important to take a step back and understand what car finance entails.

When you buy a car under finance, the bank or financial institution lends you the money to purchase the vehicle. This means that until you fully repay the loan, the financial institution is the technical owner of the car – not you.

How does this impact selling your car? Since the car does not belong to you yet, you need to settle the outstanding balance on the car before transferring ownership.

Woman contemplates whether she can sell her financed car online

How to sell a car under finance

There are 4 common methods for selling your financed vehicle:

1. Settle the loan before selling

This is the most straightforward method that requires a cash lump sum. If you have enough money to settle the outstanding balance, you can pay off the loan first and then sell the car. 

Once the loan is settled, you will have ownership of the vehicle, simplifying the selling process and ownership transfer. 

2. Conduct a private sale

Selling a financed car privately in South Africa involves being upfront with potential buyers that the vehicle is still under finance. 

The vehicle sale should be structured to allow the loan to be repaid with the funds from the purchase. This method requires transparency on the part of yourself and the buyer. The process will need to be managed carefully.

It will unfold as follows:

  • Check outstanding loan balance. Contact your lender/ financial institution and request the ‘settlement amount’.
  • Find a buyer. Be honest with them that the vehicle is still under finance so that they are aware of the implications.
  • Structure the payment. Ensure the buyer’s payment goes directly to the bank to settle the loan. You can keep whatever money is remaining (if any) after the settlement amount has been paid.
  • Transfer ownership. Once the loan has been settled, ownership of the car can be transferred to the buyer. 

3. Trade-in the car at a dealership

Wanting to sell your financed car and buy a new one? Many new and used car dealerships offer trade-in options where the existing loan is paid as part of the transaction. 

The trade-in value can be applied to your next car purchase. This is a convenient option if you are looking to upgrade your car – as long as the dealership gives you a fair price.

4. Sell your car to a reputable online platform

One of the simplest and most cost-effective ways of selling a car under finance is to use a trusted online platform like Weelee

Online car-selling platforms like these help you to sell cars online quickly, safely and easily; adopting a transparent selling process. You also have access to a team of reputable buyers who will bid on your car, resulting in you receiving the best price possible. 

Make sure that the chosen platform has experience selling financed cars and is familiar with settling the outstanding loan with your lender.

How to find a reputable online selling platform

A quick Google search asking, ‘Can I sell a financed car?’ will catapult you into a myriad of selling options, but not all are equal. 

The platform you choose should offer the following:

  • A fast and easy process. Think less than 2 minutes to upload your vehicle details online.
  • Transparency. Ensure you are updated throughout the selling process from the handling of finance to sale completion.
  • Expert assistance with finance. The platform must have a representative who can liaise with the bank on your behalf to settle the outstanding loan, making the process of selling a financed car stress-free and less time-consuming.
  • Thousands of positive reviews and a high rating on an independent online review platform like Hellopeter

Man is happy to be selling a car under finance

What happens if the car’s value is less than the loan?

This scenario called ‘negative equity,’ is a common one in South Africa, especially with new car sales where the vehicles depreciate quickly. 

You have a few options moving forward:

  1. Pay the difference. Settle the remaining loan balance with your lender using your own funds.
  2. Roll the debt over to your next car purchase. Some dealerships have the option to have the outstanding loan balance added to another car loan. While this does increase your repayments on the new vehicle, it does provide a viable alternative if you don’t have the cash required to settle the outstanding loan balance.
  3. Wait until the loan balance decreases. If you’re not in a hurry to sell, you can continue to drive the vehicle (and therefore continue paying off the loan) and wait until you can sell it for a price that settles the outstanding loan amount.
  4. Negotiate a payment plan with the lender. Some financial institutions offer options to work out a deal with your lender for more flexible payment terms. They may agree to restructure your loan over a longer period, making it easier to repay the debt if you’re selling a car under finance.

Selling a financed car made easy

While the thought of selling a car under finance may be daunting at the outset, whether you opt to sell privately or use a reputable online platform, there are clear paths to ensure the sale process is legal, stress-free and easy to follow.