Sell Car on Loan? Here's How to Break Free (2026)

You've found yourself in a bind. You're considering selling your car, but there's one hitch: it's still under finance. You're not alone. Many Australians face this situation, especially with the rising costs of living and the need to adjust financial commitments. But can you sell a car that's still on loan? Let's unravel this complex yet common predicament.

Understanding Selling a Car on Loan

Selling a car that's on loan involves more than just finding a buyer and exchanging keys. The process can be a bit more involved since the lender technically has a financial stake in the vehicle until the loan is fully paid off. This means that you need to address the loan balance before you can transfer ownership to someone else.

Typically, there are two main types of car loans in Australia: secured and unsecured. A secured loan means the vehicle is used as collateral, giving the lender a legal right to repossess the car if repayments are not met. Unsecured loans, although rare for cars, do not involve using the car as security, but they often come with higher interest rates.

Current Market Information and Options

As of 2026, the average interest rates for car loans in Australia range from 6.49% to 12%, depending on factors such as your credit score, loan term, and the lender's criteria. If you're considering selling your car with a loan, understanding these rates and your loan's terms is crucial.

Here’s a breakdown of typical options available:

How to Sell a Car That’s on Loan

Here's a step-by-step guide to help you navigate the process:

1. Contact Your Lender: Verify the loan payoff amount and any additional fees for early repayment. Request a letter of release for when the loan is settled.
2. Determine the Car's Value: Use online tools or professional appraisals to establish a fair market value for your vehicle. This helps in pricing it accurately.
3. Consider Your Options: Decide whether to pay off the loan first, sell to a dealer, or pursue a private sale. Each option has its trade-offs, so choose based on your financial situation and urgency.
4. Negotiate with Buyers: If opting for a private sale, be transparent with potential buyers about the loan situation. Discuss how the transaction will be handled.
5. Complete the Sale: Once a buyer agrees, coordinate with your lender to settle the loan and release the vehicle title. Ensure all paperwork is completed correctly to avoid future complications.

Expert Tips and Considerations

• Check for Early Repayment Fees: Some lenders impose penalties for paying off a loan early. Factor this into your decision-making process.
• Explore Refinancing: If selling is not urgent, consider refinancing the loan through Esteb and Co's network of over 83 lenders. This might secure a better rate or term, reducing financial pressure.
• Be Aware of Negative Equity: If your car's value is less than the loan amount, you may need to cover the difference out-of-pocket.
• Documentation is Key: Keep detailed records of all communications and transactions with your lender and buyer to ensure a smooth process.

Frequently Asked Questions

1. Can I sell my car if it's under finance? Yes, but you'll need to settle the loan first or ensure it's part of the sale process.
2. What happens if I sell my car for less than the loan amount? You'll need to pay the remaining loan balance to your lender.
3. Can I transfer my car loan to another person? Generally, no. The new buyer would need to secure their own financing.
4. How do I know the payoff amount for my car loan? Contact your lender for the precise payoff amount, including any potential fees.
5. What are the risks of selling a car on loan? Risks include potential negative equity, penalties for early repayment, and the complexity of coordinating the sale.
6. Does selling to a dealer simplify the process? Yes, dealers often handle the loan payoff, but you'll likely receive less than a private sale.
7. Is it better to pay off my car loan before selling? It depends on your financial situation. Paying off the loan avoids complexities but requires available funds.