Selling a Car under Finance because of Hardship?

[kody wattus]

Hi, I was curious and have intention if possible to sell my car if I am leasing it by paying fortnightly, basically renting to own under a 5 year car loan contract.

My cooling off period was a very SHORT time and I didn't have time to go back and make them aware that the vehicle was not right for me, and when I had time to call my cooling off period had ended and I couldn't return the vehicle without buying it out. Problems did arise with the vehicle as i found out it had been in a single car accident in 2008, these problems have been fixed by the company under warranty. But the vehicle doesn't suit me anymore as registration and fuel costs are getting too much and I'm earning a low income. Arrangements have been made to receive hardship for 2 months.

So my question is:

1. Can I sell the vehicle while I'm leasing it?
2. Can I use some of that money to buy the vehicle off the company to be able to stop the lease and own the car outright without actually having the vehicle in my possession if you understand what I mean?

By the end of the lease, I would have paid about $32,000 for the car (2004 V6 3.8L non-supercharged series 2 VY Holden Commodore), and it's really only worth around $3,500 privately sold or $1,300-$3,000 selling to a dealer or trade in.

Many thanks in advance if anyone can help me find a way around this, without having to pay WAY TOO MUCH for the car when it is not even worth that much.

• Motor finance wizard
• Q leasing
• Fortnightly payments of $240

 

[Sarah J]

Hi Kody,

Apologies for the delay in response.

Can you tell me which State or Territory you are currently in? There are a number of statutes, both federal and state, that regulate hire-purchase agreements. A hire-purchase agreement is similar to any contract where creditors and financing are involved. These regulations will be helpful in finding grounds to get out of the agreement due to unfair or unconscionable terms in the agreement. This is one option for your situation.

In response to your question above:

When you enter into a hire-purchae agreement, you are entering into a credit loan whereby the hire-puchase company legally owns the car until all outstanding payments are paid off, at which point, legal title transfers from the hire-purchase company to yourself. During this time, the hire-purchase company allows you to use the car in exchange for paying off the outstanding amounts (plus interest) in instalments. Because you do not legally own the car until all outstanding debt has been paid off, you do not have good title in the car. When you sell an item, unless you specifically state in the sale-purchase agreement that you do not have good title, you cannot sell the item as there is an statutorily implied duty that the seller has good title in the item and has the legal right to sell the item.

Furthermore, there will usually be a provision in hire-purchase agreements that prohibit the conversion/assignment (ie. sale) of the item until legal title has been transferred (ie. full payment of outstanding debt).

In terms of what you can actually do:

- You may draft up an agreement whereby a third party (buyer) takes up your rights and responsibilities under the main hire-purchase agreement. This means that you are not selling the car per se. However, you are selling the right to own the car after all outstanding debt has been paid off, in exchange for the debt being paid off in instalments by the third party. Whether or not you are allowed to do this will depend on the terms and conditions of your hire-purchase agreement.

- You may enter into a sale-purchase agreement for the car if you make it clear in the contract that you do not yet have legal right to the car, but that you will have legal title after payment of the purchase money by the third party and repayment of the original hire-purchase agreement. Again, whether or not you are allowed to do this will depend on the terms and conditions of your original hire-purchase agreement.

- Return the car to the hire-purchase company and terminate the hire-purchase agreement. You will most likely be at a loss overall and may have to pay a termination fee.

In short, legally, you are not allowed to sell the car because you are not the legal owner of the car. If the terms and conditions of the hire-purchase agreement allows for, or is silent on a, change of the hire-purchase party, then you may on-sell your responsibilities and rights under the original hire-purchase agreement upon full disclosure of your situation to the third party. It may be difficult to find a third party willing to take on the hire-purchase agreement and you will need to speak with your hire-purchase company to see if this is possible.