How do you buy an encumbered car? |
Man holding clipboard and signing to buy a financed car

How do you buy a car that’s still under finance?

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What to do when your dream car has a loan on it.

Buying a car that someone hasn’t paid off isn’t impossible. But you’ll need to take some extra steps to make sure that title is clear. Otherwise, you could be responsible for more debt than you bargained.

What does it mean when a car is under finance?

If a car is under finance it means that the current owner hasn’t completely paid off a secured car loan. Secured car loans use the car as collateral in case the borrower defaults on the loan. If a borrower misses a payment, the bank will repossess the car.

Cars purchased with unsecured loans, credit cards or cash are not under finance because the buyer has paid for the car with their own money or with a loan that they’re personally held accountable for.

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Rates last updated March 19th, 2019

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Why is it hard to buy a car with a loan on it?

It can be hard to buy a car with a loan on it because the loan is attached to the car, not the owner. In other words, whoever owns the car is responsible for paying off the loan.

If the seller doesn’t pay back the loan, then the buyer could be in for a nasty surprise. To make sure you’re not taking on a debt-riddled car, you need to take some extra steps to buying a car with a clear title.

How can I buy a car with a loan on it?

Creating an open, honest environment is key to buying a car under finance. Here are some steps to take before buying a car under finance

Should I buy a car that’s under financing?

There’s nothing wrong with buying a financed car, but the responsibility is on you to make sure that the car will have a clean title when all is said and done with the sale. If you find the right car, don’t be put off by existing finance — just make sure everything is out in the open.

Dealers are required to prove cars aren’t under any sort of financing, however, private sellers aren’t subject to the same regulations.

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Bottom line

It’s possible to buy a car that the owner hasn’t already paid off yet. But you’ll need to make sure that you aren’t signing up for more debt than you bargained for by making sure the title is free.

Not worth the effort? Check out our car loans page to learn about your other financing options.

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