Can you sell vehicle you bought on credit before you’ve paid it off?

If you’re no longer able to meet your monthly instalments on your vehicle finance, or you decide you’d like to buy a different car, will you be allowed to sell it and settle the debt?

We got in touch with two financial experts to find out whether this is possible, and whether this is the best course of action to take in these situations.

Tip: If you’re having trouble meeting your debt payments, click here to consolidate your instalments.  

Before selling your car you need to settle the debt 

According to Sheila-Ann Robey, financial adviser at Lifeguards, an affiliate of Liberty, it’s possible to sell an asset you bought on credit, even if it has an outstanding balance that you owe to the service provider that has loaned you the money for the asset.

“The sale of the asset will be subject to the settlement of the outstanding credit amount, whereafter the ownership of the asset passes to you, and legally allows you to sell the asset to another party,” says Robey.

She explains that without the settlement of the outstanding amount and this passing of ownership, the sale of the asset will not be possible. However, she adds that each service provider will have their own requirements for this process.

“When you decide to sell a vehicle before you have paid it off, you will need to enquire from your finance provider what the settlement amount is that they will accept,” says Robey.

“This is in order for the transfer of ownership of the vehicle to pass to you and, subsequently, allow you to sell the vehicle, whether you are selling the vehicle privately or trading it in for another vehicle,” she adds.

How to handle unaffordable finance

Lebo Nong, co-founder at Nong Wealth Property, recommends reaching out to your creditor as soon as possible, should you be unable to afford your finance instalments. They may be able to offer a lower instalment plan, allowing you to keep your car.

Failing this, your best option is to arrange a sale, via one of the two following options.

1. Sell the car and settle the remaining debt on the loan

Finding a buyer as soon as possible will enable you to avoid missing payments, which may result in the repossession of the car and ultimately, a damaged credit score.

You can approach a reputable dealership, or a vehicle resale agency, who can broker a sale. Alternatively, you can use a digital platform to arrange a private sale.

2. Find a buyer who will take over your vehicle instalments with the bank

Another option is to find a buyer who will take over the vehicle instalments. A legally-binding agreement will be required between you.

Make an appointment with your creditor to cancel your financing agreement, and have the new buyer accompany you. Once this is done, the buyer will need to set up their own financing agreement with the creditor. This will of course depend approval being granted to the buyer, for the balance of the loan.

If you can’t meet your debt payments, a debt counsellor could help. Click here for more.