automotive finance

Can Car Finance Be Transferred to Another Car?


A car loan is a long-term financial commitment.

Life changes, on the other hand, frequently push you to adjust. You may have added a couple of children to your family and require a larger vehicle, you may have a new job with a higher salary, or your living costs have increased and you can no longer manage the enormous loan payments and wish to downgrade.

So the question is, can you buy a new car on credit while still paying off the old one?

Every auto loan is unique to the vehicle in question as well as the circumstances surrounding your financial condition at the time of purchase. However, this does not imply that you will be obliged to keep an automobile you no longer want.

When you sign up for vehicle financing, you agree to repay the total amount owed, plus interest and any other costs mentioned when you signed the contract, over the loan term.

As a result, you must first pay off your present debt before considering purchasing another vehicle.

Can You Sell A Car Under Finance?

Although it is not impossible to sell a financed car, there are several factors to consider and potential complications that may develop.

An “encumbered” car is one that has outstanding finance.

The vehicle itself is utilised as collateral by the lender and labelled as “encumbered” in the case of a secure car loan.

As a result, if you sell the car without repaying the debt, the lender has the right to repossess and sell your former vehicle to cover the remaining loan balance.

If the sale does not cover the total loan amount, you will be responsible for making up the difference.

Although this is a worst-case scenario, it is one that may be avoided by learning the best strategy to finance your new car loan while also covering the expense of your previous loan.

Most lenders will let you sell a car while it is still being financed, as long as you utilise the proceeds to pay down the remaining loan sum.

It is crucial to understand that the lender may charge you additional costs if you pay off your car loan early.

If you took out a personal loan to help pay for the initial car, you are free to sell it whenever you want; however, you must continue making loan payments until the total is paid off.

If you are struggling to pay off your current loan and want to sell your car, or you would like to upgrade to buy a new one, it is worth considering refinancing to help you settle your original loan and still come away with a new vehicle.

What is Car Refinancing?

Car refinancing is the process of taking out a new loan in order to pay the balance on an existing financial agreement.

You can incorporate the outstanding balance of an existing loan together with the cost of the new car you want to purchase.

If you are looking to purchase and your credit score has improved, or you have a higher disposable income this can give you more options to work with.

It is important to discuss upgrading your car with your dealer or lender, as they can help you to figure out the most affordable way to take ownership of your new car without the hassle of worrying about your previous finance.

Refinancing carries with it the same process as setting up your original car loan, and it is just as important to do your research and shop around for different options available to you.

You may choose to set up your new agreement with a dealership (especially when trading in your vehicle), or with a new lender to what you originally used.

Purchasing Your New Car

When it comes time to buy a new car, you must consider either selling the old one privately or trading it in at the dealership.

When you trade in your automobile, the dealer and buyer will use an agreed-upon value to help pay off the remaining balance on your loan, then set up a new arrangement based on the value of your new purchase.

If you have any money left over from your prior payout, you can reinvest it in the purchase of a new car.

The opposite happens if the trade-in value of your car is less than the remaining loan balance. In that case, you must pay any money outstanding on the original loan, or include that amount in your new car loan.

The danger of rolling your current car loan into a new one is that you end up owing more on the loan than the new car is worth, and the lender may not agree to that. So, it is worth trying to get your old loan balance down as low as possible before you commit to a refinancing.

Cars tend to depreciate in value quickly. If you purchase a new car on finance, and still have money from the old one lumped into your new loan, with interest added on top, you can quickly find yourself in a tricky financial situation.

Can you transfer a car loan to another lender?

Now we’ve covered a couple of ways that you can change vehicles if you’ve got a current finance agreement, it’s worth looking into whether or not you can swap other elements of your finance plan – beginning with the lender.

We’re often asked if you can transfer a car loan to another bank – and there are a host of reasons you might want to use a different finance provider. Perhaps you’ve seen a better rate? Perhaps you’re consolidating some debt? Whatever your specific reason, it can be possible to swap loans from one provider to another – you’ll just need to talk to them to see what’s possible.

Again, having a settlement figure to hand is helpful – so call your current lender and get that first. When you’ve got the number – you can call the loan provider you’d like to move to and discuss having them settle that finance – before setting you up with a repayment plan with them.


Buying a new car while still owing money on your old one can appear difficult and complicated.

Whether you drive a renegotiated arrangement with your present lender or arrange a new loan with a dealer or another financial institution, the original lender must be satisfied that the loan value is covered.

The lender will mark the old car as “encumbered” until the original loan is paid off – either by paying off the balance or refinancing the remainder of the money owing.

Not all lenders will allow an automobile to be sold or transferred unless the complete loan repayment is made, and it is not uncommon for lenders to demand early termination costs.

If the value of car you are trading in is worth less than the remaining balance of the loan, the lender will need to be paid out first. The dealer will often insist that any money owing is paid before delivery is taken of the new car.

You can opt to remove an “encumbrance” tied to your old car by refinancing your car loan. This replaces the existing debt with another principal amount under new terms. That can result in a change in interest rates and the loan term, or a change in the type of loan that is used to secure the money needed to purchase your new car.

Although buying a new car when you still have repayments on an existing vehicle is not ideal, sometimes you need to adapt to a change in lifestyle or financial circumstances.

It is important to know that there are options available to you to get behind the wheel of your new vehicle.

Automotive Finance is an Australian company that can help guide you through your car loan process. Our team of brokers are experts in the field and can provide you

with tailored advice to help you secure the best loan for your needs. Get started with us today!


Get In Touch


    automotive finance
    automotive finance

    Get In Touch