cars, utes

Chris Reid Jul 3, 2023

When you’ve made all of the repayments for your car and it’s 100% yours with zero dollary-doos owing to a lender, you can essentially do whatever the hell you want with it without any caveats. From trading it in for something shiny and new to using it in a demolition derby or cutting it up for parts, it’s yours to literally do what you want with.

However, things change up a lot when you haven’t yet paid it off and there’s still some finance owing. In this article, we’ll explore what’s involved with trading in your car when you’ve got money owing on it, as well as offer a few other ways for you to sell it in order to swap it for something newer and/or more specific to your updated needs.


Is it possible to trade in a car with finance owing?


Short answer, it depends.

Which is a really annoying thing to read, we know. But it’s a bit like asking if a Fiat will make it to the shops and back; it’s just impossible to give a yes or no answer as it’s dependent on a number of things.

In the case of trading in a car with finance owing, these things are the terms and conditions in the thousands of financing packages out there.

And in the case of the Fiat, it’s everything found within about a 1-metre radius of the chassis.

Anyway, let’s get back to the topic at hand. So the issue with a financed car is that the car itself acts as security against however much money you still owe to the bank. For example, if you weren’t able to make repayments, they can sell it and use the money they get from the sale to cover what’s owing.

As you can imagine, for every financing package available from all the different lenders there’s a completely different set of t’s and c’s. Which means before you even think about moving ahead and trading in, you’ll need to break out the paperwork of your loan and go through it to find what it says about doing so.

Variables will include things like early termination fees and other financial penalties that may come into play when you finish your initial agreed-upon term prematurely. And honestly, it can really add up. So much so that you might evaluate your situation and come to the realisation that it’s actually cheaper to wait and finish up the loan and then trade in - although this is usually only when you’re near the end of the term anyway.

But again, it’s vital that you review the financing contract and determine just how much it’s going to cost you to ensure it’s a viable option.

It’s also important to determine whether you’re in a position of positive or negative equity. Ideally you’re in a position of positive equity; you owe less on the loan than the car is worth. In which case, if you want to trade it in you’re in a really favourable position - provided you don’t let the salesperson take you for the proverbial ride of course. However, if you in fact owe more than what the car’s worth (negative equity) it means you’re going to have to pay out the difference in price yourself and complicates things a little.

A quick breakdown looks like this:

Positive equity

Negative equity

Owing $3,000

Owing $5,000

Car’s market value $5,000

Car’s market value $3,000

Equity +$2,000

Equity -$2,000

If this is all becoming a bit confusing, give our friendly team a call on 1300 787 288 and we’ll help clear things up!


Alternative ways to sell a financed car


If you’d rather not go down the trade-in road, there are a few other options for you to consider.


1. Refinancing

It may not have occurred to you, but you might actually be able to get behind the wheel of that brand new car you’ve been eyeing with even lower repayments than you’re currently paying. Depending on when you signed your existing financing, the interest rates might have improved, packages been updated and your credit score may have improved which opens up new financing opportunities with better interest rates available to you.

Have a chat with us right now about refinancing by calling 1300 787 288 - we’ve got the knowledge and experience to secure the most incredible car financing deals for you, saving you time, trouble and money in the process!


2. Selling privately

Break out the hair gel and Tarocash suit, because it’s time to play car salesperson. Selling a car with finance owing on it yourself is a little more complicated than just putting the ad up on carsales, though they do make it bloody simple.

You need to get in touch with the lender and let them know you’re planning on selling it, at which time they’ll tell you how much is left to be paid off as well as any fees involved. Then, once you’ve worked your magic and found a buyer (and been open and honest with them about the situation), their payment transfer needs to go directly to the lender.

And if the price you sell it for doesn’t cover the amount you have left owing on it, you need to pay the gap yourself in order for the buyer to have a clear title on the vehicle.


3. Paying out the remainder that’s still owing yourself

One of the more straightforward ways to sell the car is to have no money owing on it, removing any and all issues that may have otherwise been faced. To do this, call up the lender and request a payout figure for the loan and any and all fees that might be incurred, then pay the entire amount out.

When the lender receives the money, they’ll settle up and close the loan out which makes the car officially yours, at which time you’re free to sell it with no requirement to include them anymore.


Trade-in or not, Stratton Finance is here to help you with car financing


Whether you’ve already got finance and are looking to trade it in for an upgrade, you’re looking to finance something for the first time or something in between, Stratton Finance have you totally covered.

Over the twenty-plus years we've been operating in the financing industry, our pool of lenders has grown exponentially. Which means that when you engage us to help you find car financing, you gain immediate access to thousands of financing options, ensuring you’re matched with a package that meets every one of your requirements.

Our handy finance quotation tool available online shows you an estimate of your potential monthly repayments.

Got a question for us about car financing? Get in touch with the Stratton Finance team either by calling 1300 787 288 or sending us an online message and you’ll hear back from us ASAP.

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