Please help regarding purchased a finance car

Hello All,

Please help with your suggestions related to legal issue.
I was intended to purchase a used car from private seller and put down deposit of $200. The car is still under finance.

Today, we meet up with the contract of sale. We signed the paper work and about to do the transfer to the bank, my uncle came and we check the car etc he suggest me not to buy the car as we never experience to purchase car under finance. We I told the seller that we don’t buy it and I accept to lost the deposit.

I got home and the seller sms me that he spoke to his lawyer due to I wasted his time so he want me to pay him $2000 as compensation otherwise he will look for legal action. We destroy the contract of sale but still took the photo of that.

Please help to clarify if is it reasonable for the seller ask me to pay the $2000 thought I accept to loose my deposit. On the contract of sale I only put down how much we have to pay and no such conditions.

Much appreciate your suggestions.


  • +5

    Unless it was a super good deal - why on earth would you go for a car under finance?
    Also why would you sign a document without being sure? Dont have any cooling off period.

    • +8

      No issues buying a car under finance. You just need to make sure the amount you are paying exceeds the amount owed and the money is sent directly to the finance company.

      • +8

        You don’t have to make sure the amount you pay exceeds the amount owed, most of the time, it doesn’t. Most cars depreciate faster than the value of the loan has been reduced.

        What you have to make sure of is that the lien on the vehicle is removed before paying the seller anything. The seller needs to clear the outstanding amount regardless of if it is greater to or less than the sale amount.

        A seller can either clear the loan amount themselves, or the buyer can work directly with the finance company to clean the outstand debt directly, but this is very risky for the buyer.

        A buyer should NEVER pay the seller and rely on the seller to clear the debt.

  • +3

    Much appreciate your suggestions.

    edit: You've done yourself a mischief, there.

  • +7

    Is it reasonable for them to ask you to pay more for wasting their time? Definitely not. That is what the deposit is for.

  • +5

    In this market?? Tell him to Get Stuffed™.

    • Yes. Through fb market

      • +3


      • +2

        This is how most holes are dug.

  • +6

    Tell them to get their Lawyer to contact your Lawyer with their claim and see how quickly they shut up.

    Block their number and forget about it.

    • I did not reply his sms and just got another sms that he give me 2 days to have it sort out otherwise he will take action. :(

      • +17

        Just ignore him. He thought he had a fish on the hook, it started to get away, so he tried to come up with another way to scam you.

        To clarify - there is no legal basis for him to charge you for 'wasting his time'.

        • +6

          People who are taking "legal action" do not send an SMS saying they're taking action. You hear from their lawyer.

      • +1

        Yep he was trying to scam you with the car in the first place. Now trying to scam you with threat of lawyers. Report his ad to Facebook as a scam.

  • +2

    What did you have written down in your "contract of sale"?

    If it says deposit to be forfeited if sale does not proceed, then it is just the $200 deposit

    If there is nothing that you signed stipulating that you need to pay X amount (or %) for not going through, tell him good luck and block his number and don't worry

  • +2

    How can the seller sell a car under finance unless they paid it out first. Same reason you can't sell a house with a mortgage on it unless the bank gets paid on the settlement

    my uncle came and we check the car etc he suggest me not to buy the car as we never experience to purchase car under finance

    He is right from a financial perspective. Finance company may not find you credit worthy to lend to.

    Usually contracts would stipulate clear title.

    We destroy the contract of sale but still took the photo of that.

    The seller got photos with yours and their signature? If not then it is their word vs your word.

    I'd suggest like everyone above there is no legal contract (at least not one that is enforceable) unless you guys are both commercial lawyers and it is some kind of complex sale where you pay off the finance but it is still under seller's name until it is fully paid and the seller is indemnified for any fines etc and you're indemnified for seller not paying the loan (passing through the payments). But these personal guarantees aren't worth the paper they are written on.

    • +3

      How can the seller sell a car under finance unless they paid it out first.

      You can sell a car that is financed without paying it out. That is why people should do ppsr checks.

      • +2

        Was about to say the same thing and if it is encumbered and the original owner stops paying his repayments then they can take the car off you, what you do is pay the fiance Company the amount owned and the difference to the seller

        • Theory but if you don't qualify for a loan that is just obtaining an asset by false representation. Usually it means theft of you are not authorised to use it.

      • You are not suppose to that is the point. Because it is security for the loan. If you are pledging an asset as security you don't own then it is fraud.

        • It is what it is. You can sell a car and buy a car while it is encumbered. Sucks for the buyer, but that's how it goes.

          • -1

            @brendanm: I can take stuff off your front yard and sell it just because it is mobile I can. Theft but it is what it is.

            • +2

              @netjock: Mate I don't make the rules. That's what can, and does happen. Had it happen to a mate, he did the ppsr but was in a rush and didn't read it properly. Bought the car. Months later, it was repossessed.

              • -1

                @brendanm: Rule is I take your stuff and sell them it is theft? Finance company owns the car.

                If I take out a loan and say I own this vehicle. If I lie then it is fraud right?

                Possession is 8/10 of the law. Not in court when the finance company comes up with a contract.

                • +4


                  Finance company owns the car.

                  Incorrect, they own an interest in it, a lien. See

                  If I take it a loan and say I own this vehicle. If I lie then it is fraud right?

                  I don't know why you are so upset about this. It's simply what happens. The person with the car does own it. The lender has a lien on it.

                  Possession is 8/10 of the law. Not in court when the finance company comes up with a contract.

                  The finance company simply takes the car from the new owner, and sends it to auction. Any shortfall from the sale is borne by the person who took out the loan.

                  • -3


                    Incorrect, they own an interest in it, a lien

                    That is what can and does happen. But if they can repossess and take ownership who do you think actually owns the asset? The only reason they allow the person's name on it is they don't want to be on the hook for registration, fines and insurance costs. The version where it is all included is called a novated lease what doesn't have your name on it just a right to use it upon making payments (no deposit).

                    I don't know why you are so upset about this

                    When I respond it is upset. When you respond it isn't upset. Maybe you come with answers running through fields of daffodils.

                    The finance company simply takes the car from the new owner, and sends it to auction. Any shortfall from the sale is borne by the person who took out the loan.

                    And the new owner loses their whole equity.

                    You are probably the same type of person happy paying 20% deposit to buy a house where the seller assures you they are going to pay off the loan on it then a month later the bank repossess it auctions the house, then chase the old owners because there was a 90% loan on it and the new owner is left standing with zero equity unless they find some expensive lawyers to sue the previous owner who might be broke.

                    • +4

                      @netjock: I say upset, as it sounds like you are taking it personally, and you seem to think I agree with it, or would do it, see:

                      You are probably the same type of person happy paying 20% deposit to buy a house where the seller assures you they are going to pay off the loan on it

                      You are making it personal. I haven't done it, hell I don't buy cars on loans, and the first thing I do before going to look at a car to buy, is a ppsr check.

                      It sucks for people it happens to, that's why you need to check properly, and why people are wary to buy cars that are under finance.

  • +2

    Tell them, thanks but no thanks. Keep the $200 and then just walk away.

    Just be thankful it was only $200 that you have lost.

    You prob should have signed anything without being sure first. But just tell them, "due to unforeseeable changes in my (your) personal and financial circumstances" you will be unable to progress. As such, pulling out. You do not need to disclose any further.

    But, you have to accept you have done your dow. Just lucky it was only $200.

    They should be fine with that.

    Also, if there is finance still to be paid out on the car, then they do not have the right to sell it, until the car is first paid off. If they are novating a lease of the likes, then that is a different situation and you may have accepted liability to take over the finance (transfer). But your OP does not clearly state this.

    It's likely they are wanting to use your deposit as the final payment to clear the remaining debt on the car, hence they have the $#17s with you…

    Anyways, good luck!

    • Thanks for your clear explain of the finance fact of the car. As he said I just pay to clear it.

  • +14

    People buy cars that are under finance all the time.

    I'm not sure why ozbargainites make this so friggin difficult.

    There is a very safe process to follow to avoid any issues.

    Not purchasing the car due to it being under finance was a rookie mistake op and go tell your uncle to get nicked.

    • +3

      I'm not sure why ozbargainites make this so friggin difficult.

      prob because there was no MS paint diagram involved

    • +5

      I agree with you here. So many hating on buying a car under finance. Maybe to do with so many people hating on buying a new car with finance.

      I bought a car under finance. Asked seller for a current payout letter, he got one online in like 2 minutes. I went to my bank, got two bank cheques (his payout amount and the rest), paid his bank amount directly to his bank, gave him the other, and done. Not that hard and can be done in a day.

      • Yeah also done the same thing but always gotten a PPSR first of all ! Not just before handover like OP lol

        • Very true, I didn't mention it because it should be obvious, but then I think of some of the questions on these forums and remember its not obvious.

    • Walking into a dealer and buying a car under contract you have cooling off and protections.

      OP buying it if done guy it seems. People can buy what they like. Just don't like dodgy sellers.

    • +4

      What a load of bollocks

      • ok

      • +1

        My friend purchased a car under finance, unbeknownst to her at the time. Finance company chased her up a few years later and went to repo the car

        • +5

          It happens when the seller is dishonest and the buyer is unaware and naive to dishonest sellers and doesn't follow due diligence.

          In this case the seller was upfront and the buyer was aware.

          Yes it adds another step to the purchase process but it isn't rocket science.

          • +1

            @MS Paint: It looks likes it's rocket science to alot of these simpletons on this post 🤣🥴🤦‍♂️

          • @MS Paint: A lot different if OP was paying out directly the settlement amount to the finance company.

            It seems like the onus on seller to pay it out or pass through payments.

            • +1

              @netjock: The onus is on the seller. It is their legal obligation to pay the finance.

              Would you rather trust the seller to do what is legally required or pay out the finance company direct and remove all doubt?

            • +2


              or pass through payments.

              Lol… no. While the loan is the sellers problem, I would never rely on a seller to “pass through the payment”.

              Either the seller finalises the loan before I pay, or, I deal directly with the lender. And I don’t deal with lenders unless I have the keys in my pocket and I know where the car is parked.

  • +1

    The answer to your question will be in the very contract you took a photo of and then tore up.

    • +1

      Perhaps OP should show us a copy of the contract, with personal information blocked out.

  • We destroy the contract of sale but still took the photo of that.

    No contract means no contract.

  • -3

    OP you stuffed up, you signed a contract, you signed a contract, you own a car. There is nothing wrong with buying a car under finance, it happens every day.

    • +1

      Yeah, not how contracts work. You can’t put unreasonable clauses in a contract that overly benefit one party at the expense of the other. Saying that a buyer has to pay $2,000 if they didn’t adhere to the contract would be considered unreasonable and only benefits the seller.

      Contracts can also become null and void if anything that comes to light that would have caused either party to not have signed the contract, ie; car has finance owing.

      Also, a contract of sale from a private seller would hold absolutely no water whatsoever…

      • I wasn't talking about the $2k, that might be unreasonable, depending on the price of the car. But it is not overly beneficial to one party over the other for the contract to stand.Now whether the seller car sue for any damages is a different question.

        Also I can't see where OP states if the seller said it was encumbered before or after the contract signing. If it was before than no party acted dishonestly.

        A contract is a contract regardless of what it is for. Whether it would hold up in court and whether damages could be awarded is up to a judge to decide.

  • +3
    1. Buying a car with finance from private is normal. You just need to pay the finance company whatever they are owed directly, pay the owner the rest. Never pay the owner he whole amount and hope they pay off the finance.
    2. You’ve already paid the seller $200 ‘for their time’. He’s just trying it on to get more. No rral lawyer is going to back that up.
  • What contract of sale? It’s a private sale, that’s normally just cash and fill out the back of the rego slip.

  • +1

    Hahahaha is this a troll post?

    Tell him to get ****ed.

  • The guy is full of it. You didn't sign any T&Cs when you made the deposit.

    Tell him too bad so sad.

  • +1

    Since the neither the OP nor the seller actually exchanged goods/funds, doesn't that let the contract naturally expire even with a signed agreement?

    Neither party has any claim since there were no liabilities created.

  • +3

    Hahahahahaha… no. If you gave them the $200, you have already given them more than enough.

    Just sms them back and tell them you spoke to your lawyer and he said that the buyer is only allowed to keep a reasonable amount to cover any incurred costs, such as readvertising and any paperwork they had to purchase. Tell them that $50 should cover it and your lawyer suggested that the buyer needs to return $150 from the deposit.

    • +1

      your lawyer

      Disclaimer: IANL, but is considered resident "car goto fella".

  • +2

    Just show a screenshot of the 'payment'. Seems to be how people role these days, modern day 'the cheque is in the mail'

  • Anecdotal evidence suggests OP would fail the capacity test ~ easy out.

  • Its an empty threat… he has no basis to seek legal action to go in his favourite, he has no physical proof, that what u did was intentional. Hes just disgruntled and annoyed that he lost a potential sale. He will find another buyer who’s not as savvy to bring a relative to point out its a bad decision.

  • I read this thread and didn't enjoy it. I spoke to my LoYeR and so we want $4.5k (I read slowly) for wasting my time.
    Based on the fact you might think they have any legal standing to demand compensation for their time when selling goods, surely I'm in with a shot.

  • Let him try. You can lose the deposit not any more. Sounds dodgy as.

    You can still buy the car if you like it, just get the payout figures and where to send the money to finance company, with the balance going to the seller. That’s how I sell my cars when I end a novated lease.

    But that being said, seller sounds like a C0CK! Give him a wide berth, and ignore any future contact. Sorry you had to go through such crap.

    Just remember until you buy the car, YOU have all the power.

  • +2

    A couple of points, old mate really isn't likely to sue you for $2000. It's a bluff

    Buying a car under finance is no problem if you follow the right process…

    1) Do a PPSR search before agreeing to buy the car, it will tell you a: if its financed and b) who it's financed with.
    2) Once you know the car is financed and you've agreed a purchase price ask the buyer to produce a current payout letter from their financier, this will tell you the total amount owing on the loan and how to pay it out. (it's a good idea to get a payout letter valid for 7 days as the amount changes as interest accrues and make sure you keep a copy)
    3) The seller may not have sufficient funds to pay out the loan themselves before you buy the car , no problem see next step
    4) If you agree to buy the car for say $10k, and the payout is $7k then you go the bank where the finance company has their account (this will be on the payout letter) and deposit the $7k to the finance company to pay out the loan balance(keep the receipt) and then give the seller the $3k remaining to make up the $10k purchase price. Then you and the seller do the rego transfer over to you, give you a receipt for the full 10k etc
    5) Once the loan has been paid out the financier will notify the PPSR that the car is no longer encumbered, this can take up to a week. Just do a PPSR search a week later, if it's not removed yet call the financier and ask why
    5) UNDER NO CIRCUMSTANCES give the full purchase amount to the seller, once you give them the full amount you are relying on them to pay the financier out for the car, if they don't you may find the financier knocking on your door repossessing the car you think you own and you paid full price for.

    If the finance amount is higher than what they are selling the car for then it's a little different

    1). If they are selling the car for $10k but they owe $12k you still get a payout letter valid for 7 days, you still go to the bank together with the seller but in this case you deposit the amount you agreed to buy the car for ($10k) and the seller deposits the other $2k making up the $12k owed. Again get a receipt from the bank, a copy from the seller of the amount they deposited and then sign transfer docs etc

    Some people freak out about buying a car, bike, boat under finance. It's really not that difficult just don't blindly trust people

  • Potential problem - you say you signed the contract.
    If you gave the signed copy to the seller so he has it then he could indeed try to claim money from you because you didn't pay him for the car.

    If you didn't give him the signed copy then it's totally fine. He just knows your a foreigner and is trying to scam some money out of you. Best to ignore him, don't reply to him, don't sms or answer if he calls.

  • This happens all the time
    Wasting time with failed sales is part of business.
    Just ignore him

  • Just DON'T DO IT!

    They don't own the vehicle… the finance company does.

    They have to payout the finance company b4 they "own" the vehicle.

    Then you have to be asking for proof, which could be a simple photoshop receipt.

    Just DON'T DO IT!

    • Did you read anything in this thread?

      1. They didn’t do it
      2. There are a number of comments stating that buying a vehicle under finance is OK as long as you directly pay the finance off.
  • For a contract to be legal it must be witnessed and signed by the witness at the time both party's sign it.

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