When you hear the term 'under finance' it means the goods or equipment are subject to a loan or finance contract. This refers to cars, boats, caravans, motorbikes, trucks and all types of business equipment and machinery which are purchased with a loan. That is both personal loans and business finance. When buying goods and equipment with a loan, the borrower, be that a business owner or an individual, decides in consultation with the advisor and/or Jade consultant, the length of the loan term. Loans arranged through Jade Finance have a fixed loan term which we refer to in years or months.
For a whole range of reasons, people decide to sell, upgrade or replace their goods or equipment before the end of the fixed loan term. That is, when they still own money to the lender. When this happens, it is referred to as ‘selling under finance’.
If you are planning to upgrade to a better car, bigger boat or new technology equipment (or a bike or caravan or truck) and you have a finance deal on your existing vehicle, then listen up and we’ll explain your options in proceeding.
You Own the Loan
The critical issue to realise is that the loan or finance is your responsibility. You own the loan and it is not transferable when you sell the goods. The finance obligation is not on-sold with the goods. Your name or your business is on the finance contract and that’s that.
Before you sell the goods or in sync with the sale, you need to finalise the existing loan obligations.
PPSR
When you take out finance, the lender records the loan against the goods on what is known as the Personal Properties Security Register. This is national and superseded the previous REVS systems some years ago. If you’re buying second hand goods you can check www.ppsr.gov.au to ensure they are unencumbered or no money owed on them.
Selling Under Consumer Finance
If you have a secured loan for a car, boat, bike or caravan and sell before the end of the loan term you can either:-
- Pay out the existing loan prior to selling. With Personal Secured Loans break fees will apply.
- Trade-in the goods and take out a loan for the new vehicle. If you are trading in an item, the dealer could pay part of the trade in direct to the lender to repay your loan or give the funds to you to finalise the loan. If you’re taking out a new loan with Jade Finance for the new goods, your consultant will work with you to finalise the existing loan and establish the new loan. Break fees will apply on secured loans.
Either way, you will need to contact your lender and get a ‘payout figure’. This will be the amount that is due on the loan on that date. A payout figure will have a timeframe after which it will either increase with interest or decrease if you make the next due repayment.
Selling Under Business Finance
When selling or trading vehicles, trucks or equipment before the end of the finance term, you will need to take into account any residual or balloon included in the contract as well as any outstanding monthly repayments. As with consumer finance, contact your lender for an exact figure. This can be significant if looking to trade-in the asset on a newer model. You will likely be hoping the trade-in price will cover the outstanding debt.
If trading in say a car or truck on a new model, as with the points mentioned above in the consumer notes, you can discuss with the dealer the best way to pay out your existing loan. When setting up a new finance arrangement for the new vehicle with Jade, your consultant will handle a lot of the paperwork and arrangements on your behalf. Just another of the great benefits of our service as your lender.
If you’re selling a business with the equipment included and the equipment is under finance, the situation may be more complex. Speak with your accountant or financial advisor or refer to the lender as to what options you have in these circumstances. Typically, the seller would be expecting the proceeds of the sale of the business to cover such expenses and more.
Private Sales
If you decide to sell your goods through private platforms, whoever is interested in buying should do their due diligence checks and see you owe money. They will usually expect you to finalise this before the sale proceeds.
Avoiding Fees and Penalties
Both consumer and business finance contracts can involve break fees when a loan is finalised prior to the agreed fixed loan term. In order to avoid such fees, when arranging your finance with Jade Finance, pay close attention when deciding on the loan term that suits you. While a longer term reduces the monthly repayment, if you think you’re going to want to trade up before that time, it may be worth opting for a shorter term.
To discuss all things finance especially quotes on something new for your lifestyle or business, just give us a call!
To arrange consumer or business finance speak with one of our Jade Finance consultants. Call 1300 000 008
DISCLAIMER: YOU ARE ADVISED THAT THE INFORMATION PRESENTED HERE IN THIS BLOG, IS FOR GENERAL INFORMATION AND NOT INTENDED TO REPRESENT FINANCIAL ADVICE IN ANY WAY. IF YOU CONSIDER THAT YOU DO REQUIRE ADVICE IN REGARD TO YOUR FINANCIAL SITUATION, THEN WE RECOMMEND THAT YOU SEEK A CONSULTATION WITH A PROFESSIONAL FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED IN REGARD TO THE DETAILS OR ANY ERRORS IN THE CONTENT WHICH MAY IN PART HAVE BEEN SOURCED FROM A RANGE OF SOURCES.
