Buying a used car is an exciting milestone, but it comes with a few essential checks. One of the most important is finding out if the car has finance owing on it. If you buy a car with an outstanding loan, you could be taking on that debt yourself, and in the worst-case scenario, the lender could even repossess your new car.
LoanCalculator.com.au is Australia’s leading comparison website, helping thousands of Aussies find smarter ways to finance their new or used car. We understand the risks involved in buying privately, so we’ve put together this straightforward guide. Here’s how to check if a car is under finance and protect yourself from unexpected financial trouble.
Why You Must Check if a Car Is Under Finance
When a car is bought with a loan, the lender holds a “security interest” over it until the debt is fully paid. This means they have a legal claim to the vehicle. If the previous owner stops making payments, the lender has the right to repossess the car to recover their money.
So, what does this mean for you? If you buy a car with finance owing, that security interest transfers to you, the new owner. The seller isn’t legally required to tell you about any outstanding debt, so you could unknowingly inherit it. Suddenly, you might be responsible for someone else’s loan repayments, or risk losing the car you just paid for. According to Equifax, only one in three Australians are aware they can undertake research into the history of a car before committing to a purchase.
We’ve helped thousands of Australians compare car loans from major banks, credit unions, and non-bank lenders, and we always stress the importance of due diligence. A simple check can save you from a lot of financial heartache.
How to Check if a Car Has Finance Owing
The best way to see if a car has finance owing is by conducting a Personal Property Securities Register (PPSR) check. This was previously known as a REVs check. The PPSR is a national online register that shows whether a vehicle has a security interest recorded against it.
A PPSR check will tell you if the car:
- Has finance owing
- Has been reported as stolen
- Has been recorded as written-off
While some companies offer detailed vehicle history reports for a fee, a PPSR check is very affordable. The official Australian Government PPSR website charges just $2.00 for a search. All you need is the car’s Vehicle Identification Number (VIN). Be wary of third-party sites that charge significantly more for the same basic check.
Where to Find the VIN
The VIN is a unique 17-digit code that can definitively identify a vehicle. You can find it:
- On the car’s registration certificate
- On a plate in the engine bay
- On the driver’s side door jamb
- At the bottom corner of the windscreen on the passenger side
Can I Get a PPSR Check for Free?
Although the official PPSR search costs $2, some companies offer it free of charge as part of their services. For example, if you are looking for a loan or policy, some car insurance companies or finance brokers will run a PPSR check for you. It’s always worth asking but bear in mind that $2 is a small sum for peace of mind. Also, other information brokers might provide their own car history fact checking service for a deeper look at the car while having higher prices to pay.
How many cars are sold under finance?
Here are some statistics about car finance and how many may be sold with finance still owing, otherwise known as an “encumbrance”.
| Cars Under Finance, Total | 2.5 million |
| Used Car Sales (2024) | 2.32 million |
| Proportion of used cars still encumbered | 12.8% |
Sources: AIR (2024), Equifax (2015)
What Should You Do if the Car is Under Finance?
If the car you’re interested in is under finance, here’s what to do:
Talk to the Seller
Tell the seller what you found out via PPSR. They may not know about the financial burden, or they might be working to erase the debt. (However this should be a major red flag at any rate.)
Get Evidence of Finance Clearance
Request proof from the seller that the finance has been or will be cleared. This might be a letter from the finance company stating that the loan has been fully repaid. Find the date on any documentation, as the amount owing can change daily.
Pay the Finance Company Directly
Once you have reached an agreement on a price and the total amount owing, pay the outstanding finance as directly to the lender as you can. For example, say you agreed to purchase a car for $50,000 and the lender determines that $20,000 is due, pay the lender the $20,000 and seller the $30,000. If the amount owed exceeds the sale price, the seller must pay the difference before you give away any of your cash.
Think About Escrow
An escrow can shelter each party at the transaction until the seller has settled the finance.
Get Written Confirmation
Once paid, a letter needs to be sent from the lender confirming the vehicle is no longer encumbered.
Walk Away if Necessary
If the seller could not give adequate proof that the finance had or will be cleared, best to walk away. It isn’t worth the risk of having the car taken back.
Other Important Checks Before Buying a Used Car
A finance check is just one part of your pre-purchase homework. Here are other crucial steps:
Free Registration Check
Before you even consider a PPSR check, run a free rego check through your state or territory’s transport authority. This will confirm:
- The car’s make, model, and year
- Registration status and expiry date
- Compulsory Third Party (CTP) insurance details
You can find links to your local transport authority below:
- Australian Capital Territory
- New South Wales
- Northern Territory
- Queensland
- South Australia
- Tasmania
- Victoria
- Western Australia
Mechanical Inspection and Test Drive
Always get a professional mechanic to inspect the car. They can spot underlying issues that you might miss. A thorough test drive is also essential. Listen for strange noises, check the brakes and steering, and make sure everything feels right.
Plan Your Finances Before You Shop
Ready to start looking for your next car? It’s a good idea to know how much you can afford to borrow before you fall in love with a vehicle. Understanding your potential repayments helps you negotiate with confidence and stick to your budget.
Use our powerful and free Car Loan Calculator to estimate your repayments before you apply. You can instantly see how different loan amounts, interest rates, or terms affect your monthly budget. It’s completely free, and no sign-up is required. Exploring your options with our calculator won’t affect your credit score, so you can plan your purchase risk-free.
Better yet, you can apply straight away with 40+ of Australia’s top banks and lenders – we do the heavy lifting, so you have more time to shop for your dream car!
