Yes, you can sell a car you still owe money on. What you can't do is give the buyer clear title while the debt is attached to the vehicle — and any buyer running a PPSR check will see the encumbrance before they pay you.
So this is a sequencing problem, not a legal barrier. Get the order right and it's straightforward.
Don't hide it. The buyer will find it on a PPSR check, and discovering it mid-negotiation is what kills the sale. Mentioning it upfront makes you look organised instead.
Why it matters to the buyer
When a car is used as security for a loan, the financier's interest is registered on the Personal Property Securities Register. If the car is sold and the debt isn't settled, the financier may be able to repossess it from the new owner.
That's the risk the buyer is checking for, and it's why "trust me, I'll pay it off afterwards" doesn't work. They need evidence, not assurance.
Step one: get a payout figure
Contact your financier and ask for a payout figure — sometimes called a payout letter or settlement figure. It's the amount that clears the loan as at a specific date, and it's usually valid for a short window because interest accrues daily.
Two things worth asking at the same time:
- Is there an early termination or discharge fee? Some contracts have one, and it changes your arithmetic.
- How long after payment does the encumbrance come off the PPSR? This is the question that determines your timeline, and the answer varies by financier. Ask for it in writing.
Step two: work out whether you're above or below water
Compare the payout figure to what the car will realistically sell for.
If the sale price exceeds the payout — the common case — the sale proceeds settle the loan and you keep the difference. Straightforward.
If the payout exceeds the sale price (negative equity), you have to fund the shortfall yourself for the loan to clear. That's an unwelcome discovery, and it's much better made now than after you've agreed a price with a buyer. If you're significantly underwater, selling may not be the right move yet.
Step three: choose how the money flows
Three common approaches, in rough order of how much they reassure a buyer:
Pay the loan out first, then sell. Cleanest if you can afford it. The encumbrance is gone before you advertise, the PPSR check comes back clean, and the sale is an ordinary private sale. Ask your financier for confirmation the debt is discharged.
Settle at the financier's branch with the buyer present. The buyer pays the payout amount directly to the financier and the balance to you, in one sitting. Fiddly to arrange, but it's the arrangement a cautious buyer is most likely to accept, because they watch the debt being cleared.
Take the payment, settle immediately, then evidence it. Simplest for you, most exposed for the buyer — they're trusting you with the gap between payment and discharge. If you go this route, expect to provide written confirmation from the financier, and expect some buyers to decline.
Whichever you choose, agree it in writing with the buyer before the handover, and say so in the ad. "Finance owing, will be settled at [financier] on completion" is a sentence that filters out buyers who'd have walked anyway.
Step four: confirm the encumbrance is actually gone
Payment and discharge are not the same event. After the loan is settled, ask your financier for written confirmation and check the PPSR reflects it.
Give the buyer a copy. A dated discharge confirmation alongside the receipt is what turns "he said he'd pay it off" into a documented transaction.
What the paperwork looks like
Everything from an ordinary private sale, plus two additions:
- Your payout letter or discharge confirmation from the financier
- A receipt that records the finance arrangement — who paid what to whom, and when the debt was settled
The rest — the notice of disposal, the transfer, any inspection your state requires — is unchanged. See what documents you need and your state's requirements.
What not to do
Don't sell without telling the buyer. Beyond the obvious, it wastes everyone's time — the PPSR check will surface it.
Don't take a deposit to pay down the loan. You'll have the buyer's money, a partially-cleared debt, and no car sold if they change their mind.
Don't let a buyer pay the payout figure to you rather than the financier and then chase you for proof. That arrangement protects nobody.
What this means if you're selling on MotorLoop
Finance is between you, your financier and your buyer. What we can do is the listing: listing a car on MotorLoop is free, and buyers message you in the app — a better channel than a phone call for the back-and-forth a finance settlement needs.