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

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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Name	Product	Filter Values	Minimum credit score	APR	Loan term	Requirements
PenFed Auto Loans			Varies	Starting at 1.79%	3 to 7 years	Active membership with PenFed	Low APR car loans from a well-known credit union.	Go to site More Info	Compare	loading Fetching your data...
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.	Go to site More Info	Compare	loading Fetching your data...
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.	Go to site More Info	Compare	loading Fetching your data...
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.	Go to site More Info	Compare	loading Fetching your data...
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.	Go to site More Info	Compare	loading Fetching your data...
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.	Go to site More Info	Compare	loading Fetching your data...
LendingTree			Good to excellent credit	Starting at 1.99%	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.	Go to site More Info	Compare	loading Fetching your data...
myAutoloan.com Car Loans			550	1.89% to 27%		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.	Go to site More Info	Compare	loading Fetching your data...

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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 an car escrow account. If the seller doesn’t pay off the debt in a set amount of time, you’re 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.

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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.

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.

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