What Is an Encumbered Car & What Is the Risk of Buying It?

Encumbered Car

Buying a second-hand vehicle goes as the best option for people who want a new car quickly. Getting your hands on such a car seems a good option because of the lower costs, and you get to choose from a wide range of vehicles. But the risk is you might buy an encumbered car in the process. If you end up buying one, it is critical to know what exactly does an encumbered car means and why you should try to avoid it?

In this article, let’s dig up some information on the encumbered cars and their associated risks.

What Is An Encumbered Car?

Buying used cars come with its own fair share of risks. The car you buy has its history. If the seller of your car is not honest, then the history of that car would eventually come back to you. The biggest pitfall of buying a used car is that you may end up with an encumbered vehicle.

An encumbered car is a car that still has pending finance on it. What this means is that these cars are bought on loan, and the loan has not been totally repaid yet. This is different from when you take a loan from your ban and buy a car, as in the current case, the bought car becomes the security loan itself.

So, the loan in an encumbered vehicle applies to the car and not its buyer. The vehicle itself is encumbered no matter who is the owner of the car, and it will remain so until the complete load has been paid.

Why Is It Better To Avoid Buying An Encumbered Car?

An encumbered vehicle will remain in encumbrance no matter who possesses the vehicle. The loan for the encumbered car will remain open until it is fully paid. So what does this mean for you? Let me walk you through a quick example:

Emily gets a loan for the car from her bank and buys a car using her car itself as the collateral. Her loan spans over seven years, and after five years, she decides to sell her car.

Now you are hunting for a good second-hand car, and then you find Emily’s car. The car is exactly like the car you have always wanted. You purchase the car from Emily and drive it away feeling like the happiest person.

Emily stops paying her loan repayments after that. Now the issue is that the loan for the car is still remaining, which means the car lender would come to repossess his vehicle. Emily tells the person that she has sold her car to you, and as you now possess the car, the debt collector would take the car from you. This will leave you without any car. Believe me, it is such a terrible situation to be put in.

Is It Possible To Sell An Encumbered Car?

The simplest answer to this critical question is yes. You can sell your encumbered car even if the vehicle you bought has not been totally paid off until now or has a loan involved in it. None of that means that it is illegal to sell the car. In other words, you can sell your car in order to pay the rest of the money you owe in the car loan.

Nevertheless, it is pertinent for an encumbered car’s seller to declare the status of the car to the buyer. If the seller fails to tell the buyer, it makes the process of selling a fraud. Of course, this also risks every kind of legal consequence that can get the seller sued too.

How Do You Find Out If Your Car Is Encumbered?

If you want to find out if the car you are buying is an encumbered car, the first way to go about it is by asking the car’s owner. However, there is an off chance that the owner can be lying. So, I recommend you run a rev check online.

You can simply type your query of ‘rev check’ and then enter the state online. Now you will come across various free websites that provide this information. Finally, you will need to submit the VIN number or vehicle’s registration.

What If You Still Want To Buy An Encumbered Car?

If you are absolutely sure that you want to purchase the encumbered car, then you can follow some easy steps before you proceed with the purchase.

The first step is to make sure that you meet the seller or owner of the car in person to talk directly. If all of this feels shady and they don’t seem trustworthy, then it would be better to walk away from this sale.

Secondly, you should try to find out as much as you can about the car loan. How much money is involved in this, and how does the car owner intends to pay the loan off? Are you sure that the owner will keep paying off the car loan, and there will be no risk involved in your purchase?

You can some of the details by contacting the financial institution or the financier involved in this car. The PPSR report includes all of these details, so you may perform a completely independent investigation.

Moreover, if you think the owner of the car seems trustworthy and the purchase looks like a good decision, then you should go ahead and purchase the car through Reliable Car Wreckers Gold Coast.

What Should You Do If Your Car Gets Repossessed?

An encumbered car, when bought, always comes with some existing loan. It is important for the seller to tell you about the car encumbrance, but if he doesn’t tell you about it at the time of sale, then you can take this matter to court. The decision of the court will depend on the specific case, but there are good chances of you winning if you didn’t know at the time of purchase.

The Bottomline

Buying an encumbered car comes with some associated risks. Thanks to the PPSR report, you can find out about the details of such a car independently. Therefore, you must check with the car owner before buying a car with a pending loan on it.

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