Tips for Buying a Used Car under Encumbrance

Introduction

When buying a used car, you should exercise careful due diligence to get the best deals. You should ensure that you don’t end up buying an encumbered car as you can lose possession of it if the loan is not repaid by the original owner. An encumbered car is purchased with a secured car loan and the car is used as security for that loan. You should start by getting a car history report for the used car which you plan to buy. There are agencies like REV Check who can provide you the car history report. You need to share either the VIN number or registration number of the car and pay a nominal fee to get the report. The car history report will provide you complete details on the encumbrance status of the car which will help you make informed decisions.

Problems with Buying Encumbered Cars

Cars which are financed on secured loan is attached to the car as collateral. If the car owner is unable to repay back the loan, the financing institution can take back the possession of the car. The important point to note here is that the loan is secured against the car irrespective of who the owner is. Hence, if you buy a car which has outstanding financial liability on it and the original owner does not repay it back, then you can lose possession of the purchased car. You should always check the encumbrance status of a used car before you consider buying it to be on the safe side.

How to Buy a Used Car Which is Encumbered

You should take due precautionary measures before buying a used car which is encumbered. You can start by inquiring about any outstanding financial dues on the used car which you plan to buy. If the car owner is upfront and honest about providing you the financing details of the car, you can consider taking the buying process further. If they hide details, then the car is not worth buying. You can also get a car history report from REVS Check which can provide you details of the encumbrance status of the car. You can use it to verify the details provided to you by the car owner and check for any inconsistencies.

It may also be the case that the seller may need the money from the sale proceeds to repay back the outstanding loan. However, you should pay them only when the car is completely debt-free. You can finalize the sale process in the office of the financing institution which will enable the car owner to repay the loan instantly once you pay them.

Is it Worth Buying an Encumbered Car?

Buying an encumbered used car is perfectly legal and there is nothing wrong in buying such a car. You only need to be more careful and exercise additional caution while buying an encumbered used car. If you are buying from dealers then they are obliged to provide details of clear title to you, however, private sellers are not obliged to provide you such details. In such cases, the responsibility about finding out the encumbrance status of a used car lies on you. You should only pay for the car and sign your name on the bill of sale after the car is debt-free.