What is Clear Title?

​When you buy anything, especially a large purchase such as a car, you expect it to be yours entirely. 

But how do you know, especially if you’re buying second-hand from a private buyer, that the car they’re selling you is exactly what they say it is?

WHAT IS AN ENCUMBERED CAR?

If you take out finance for something (like a car), your lender will usually register a ‘security interest’ over what you purchase because they, effectively, own part or all of it until you pay off the monies you owe. This means the car is encumbered, and that the ‘title’ (which details the ownership of the vehicle) is not clear, meaning that the owner of the vehicle still has finance owing on the vehicle.

This security interest is linked to the car by the Vehicle Identification Number (VIN), and that is what the lender will come looking for if there is money owing on it. So, in a worst-case scenario, they will repossess the car right out from your garage, even if you’re not liable for the repayments on the vehicle.

HOW CAN I CHECK IF A CAR HAS ANY FINANCE OWING?

Buying privately, you have to ensure that the car has clear title – if you don’t trust the seller’s word (and even if you do, just to double check), you can run it through the Personal Property Security Register (PPSR) which has the details on anything that has a security interest in Australia such as cars or boats.

Running the VIN through the PPSR will bring up the basic details of the car (such as the colour and build and compliance dates) for you to check that the vehicle is exactly as described by the seller. It will show if it’s been reported stolen or if it’s ever been registered as ‘written off’. The PPSR will also tell you if there are any security interests on the car.

A basic PPSR certificate costs $25.00, while the more comprehensive CarHistory report costs $36.95, which will give you extras such as a general valuation, first sale information and if the car has ever had any insurance claimed on it.

BUYING AN ENCUMBERED CAR

It doesn’t mean that you can’t buy a car that has got finance owing on it, it just means that you have to be even more thorough when purchasing the car.

You can request the seller pay off any finance before you proceed with the sale, but make sure you recheck the PPSR before going ahead.

If the seller has been upfront with you and is planning on using proceeds of the sale to clear any finance owing, ensure that you have the seller contact their financier to request a letter, sent to you directly, with a dated payout quote with an exact amount of the finance owing.

To ensure that the car is yours free and clear, you can arrange for two payments at the time of transfer. One payment directly to the lender to clear any finance, and another if there’s any amount left over to the seller. You can then get the financier to update the PPSR and proceed with the sale.

It is illegal for registered motor traders to sell a vehicle without cancelling all security interests over the vehicle.

At Motorama, you’re guaranteed that every car – new, pre-owned or demonstrator – has clear title, and any finance you need is processed through our expert Business Managers who specialise in automotive finance.