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

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.

Compare loans for a car under finance

Explore your options by minimum credit score, APR, loan term or requirements. Select the Go to site button for more information about a particular lender.

Name Product Filter Values Minimum credit score APR Loan term Requirements
Carvana
No minimum credit score
3.9% to 27.9%
Varies
18+ years old, annual income of $4,000+, no active bankruptcies
Get pre-qualified for used car financing and receive competitive, personalized rates.
car.Loan.com Car Loans
300
Varies by network lender
Varies by lender
Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
CarsDirect auto loans
No minimum credit score
Varies by network lender
Varies by network lender
Must provide proof of income, proof of residence, and proof of insurance.
Save time and effort with this lending service specializing in beginner-friendly or subprime car loan.
Auto Credit Express Car Loans
300
Varies
Varies
Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
Get connected with an auto lender near you, even if you have bad credit.
Monevo Auto Loans
500
3.99% to 35.99%
3 months to 12 years
Credit score of 500+, legal US resident and ages 18+.
Quickly compare multiple online lenders with competitive rates depending on your credit.
LendingTree
Good to excellent credit
Starting at 0.99%
Varies by lender
18+ years old, good to excellent credit, US citizen
Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
myAutoloan.com Car Loans
550
Starting at 1.89%
550+ credit score, no open bankruptcies, $24,000+ annual income, US citizen or permanent resident, 18+ years old
Get up to four offers in minutes through one simple application. Multiple financing types available including new cars, used cars and refinancing.
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Compare up to 4 providers

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

  • Ask the owner about financing. If the owner is open and honest about how the car is financed, it’s a good sign that they’re genuine when it comes to the sale. If they attempt to hide that money is owed on the car, it’s probably worth moving on.
  • Check with the DMV or search online. With the vehicle number and registration details, you can get a report on any vehicle and find out whether there is money owed on it or not. Ideally, the report will align with what the owner has told you.
  • Negotiate the sale process. The seller will most likely need your money to pay back their loan. However, you don’t want to hand your money over until the car is finance-free. The solution is to finalize the sale in the office of the seller’s bank or lender so they can pay out the car loan as you give them the money.
  • Put the deal in a car escrow account. If you’re worried that the seller won’t pay off the loan once you purchase the vehicle, set up a car escrow account. If the seller doesn’t pay off the debt in a set amount of time, your money will be protected and returned under the terms and conditions of the escrow account.

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.

Compare car loans

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.

Frequently asked questions

Can I trade in a car that still has money owed on it?

You can, but if you trade it in for less of a value then what’s owed on the loan, you’ll be taking a loss.

What should I do before selling my car that has an unpaid debt on it?

You should notify the finance company and figure out how much is still owed on the vehicle, plus any fees, so when you sell it you can clear your debt completely. You can learn more about how this works in our guide to selling a car under finance.

Do I still owe money on a car that’s been repossessed?

You may. Check with the lender if there’s a deficiency balance or any other fees before those debts cause further damage to your credit score.


Image source: Shutterstock

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