Many people who own a car that is being paid off wonder if they can legally sell the car while they're still paying for it. The simple answer to this question is that yes, in South Africa, you are legally allowed to sell your car even if you have not paid it off in full. Selling a car before it is paid off is a relatively common practice, though sellers often have different motivations for making this kind of sale. There are a few precautions to take if you plan on selling your car while it is still under finance, some of which only apply in certain situations.
More Detail on Selling a Car Before It Is Paid Off
Not many buyers feel comfortable buying a car without official ownership documentation. In order to get that ownership documentation from the bank, you have to pay off your loan. So, ideally, when you sell your financed car, you will make enough money from the sale to pay off the loan. In a perfect world, this is what would happen every time someone tries to sell a car before it is paid off. Unless your car is worth the same amount or more than is leftover from your loan, you are not likely to make enough money from the sale to cover the entire loan amount.
If you are hoping that your car sale will cover the entire cost of the loan, do your research. Remember that cars lose value with time. Even if your car is less than a year old, it still will not be worth what you paid for it. Depreciation, or the loss of monetary value, is a normal part of car ownership. Make sure you check your car's book value before you sell it. Do not assume that you will be able to get the same amount of money you initially paid. Your final selling price will likely be far lower than the original cost, and if you attempt to sell the vehicle for more than it's worth, you probably won't succeed in selling it.
Selling to Cover Debt
Some people view their cars as assets that can be liquidated if they need to pay off large debts, but this isn't necessarily the case. If your car is worth less than you owe and you do not have other ways of contributing money to pay off the loan, selling the car might not be the right move. You can try to sell the car for more than it is worth, but do not spend any money as part of this effort, and do not count on it working. Most buyers research a car's book value and will not even consider paying much more than that value. Even if you sell for slightly above the book value, this may not be enough to cover the entire loan amount, and if you cannot make up that difference yourself, the sale is likely to fall through. Don't price based on what you owe if the book value is lower than that amount.
Selling While Under Debt Review
There are some caveats to consider before trying to sell your financed car. If you are under debt review, you might be thinking about making a quick car sale and using the money to cover your debts. This may not be as easy of a solution as it may seem. In some cases, a person under debt review must have the sale approved by their bank. This may entail submitting a written offer from the buyer and paying VAT on the sale. Some buyers may be reluctant to do this. Additionally, if the sale does not cover the full remaining amount of the loan, this shortfall may become part of the debt review. It may be possible to work with a debt counsellor in these situations.
With the knowledge that, in most cases, it is legal and even normal to sell a financed car before paying the loan off in full, you may be considering a mad scheme to make your money back, particularly if you're in debt. Unfortunately, selling your car may not be the magic solution you're looking for. If you owe more on the car than it is worth, you are not likely to make enough money from the sale to pay off the shortfall amount. If this is the case, you will have to provide the rest of the money to pay off the loan on your own in order to transfer ownership to the buyer. Very few buyers are likely to feel comfortable purchasing a car with the promise that the seller will transfer ownership once they have paid off their loan. Be mindful of this and try to get the best purchase price you can.