Buying guide

What if there’s money owing on the car?

Car owners must disclose whether there’s any security interest hanging over the car.

Under the terms and conditions section of their listing, car owners must disclose whether there’s any security interest hanging over the car. If the owner does disclose this, then the amount owing should be paid off before you take ownership of the car.

Motor Vehicle Traders are also required to disclose any debt owing in a Consumer Information Notice (CIN), which should be displayed in the window of the car. Without disclosure, the car dealer will be liable for the debt if you buy your car from them.

Do your homework or pay the price

If you’ve bought the car privately and ownership has already been transferred to you, as the official owner you could be liable for paying off the costs. Legally, if the seller defaults on their payments, you will become liable and the private loan provider has the right to repossess your car to pay off the loan. Ouch!

One form of damage limitation would be to contact the seller to see if they can work out the loan payments with the provider before that happens. Alternatively, you should inform your insurance company and see if they are able to help.

Vehicle Information Reports

The best way to avoid this post-purchase agony and heartbreak is by getting a MotorWeb Vehicle Information Report (VIR). This will show you if there’s any money owing on the car and, if there is, the seller will need to provide you with confirmation from the lending provider as to how much debt is outstanding.

If the VIR informs you there’s money owing and you still want to buy the car but the seller is reliant on your payment to settle the loan, you could arrange to pay the finance company directly yourself (do not rely on the seller to do this), and pay the remaining amount (if any) to the seller.

Steps for paying directly to a finance company

  • Ask the seller to request a settlement statement from the secured party (finance company). Make sure you are witnessing the original document. The settlement statement will state the amount required to repay the loan in full but will only remain valid for a short time.
  • Check the financing statement number on the settlement statement matches the financing statement number on the security against the vehicle you are checking. You should be able to view this number in the VIR as well.
  • Make two payments: one to the secured party (finance company) to repay the loan in full (the settlement figure), and the other for the remainder of the agreed purchase price to the seller. Ensure you reference the financing statement number when making a payment to the secured party.

Knowing the debt status of the car you’re looking to buy is the key to avoiding stress, heartbreak and financial pain. Performing your due diligence is vital to avoid buying a car with money owing and making sure you’re not the one left picking up the bill! The tips we’ve given you should help you to avoid this fate. For further help with your car buying journey, be sure to check out our help page on how to pay the car seller.