Buying a used car can be exciting. But before you hand over your cash, there’s one thing you must do — a finance check. Why? Because the car might have an encumbrance.
But what does that even mean?
Let’s explain in easy terms what an encumbrance is, why it matters, and how a finance check can save you from losing your car and your money.
What Is an Encumbrance?
An encumbrance means there is money still owed on the car. The person selling the car might have taken a loan to buy it, and that loan hasn’t been paid off yet.
So, even if you buy the car, the bank or finance company still has a legal hold on it. That means they could take the car back at any time. Yes, even from you!
So if you buy a car with an encumbrance, you might:
🚫 Lose the car
🚫 Still owe money
🚫 Get into legal trouble
That’s why a finance check is so important before buying any second-hand vehicle.
What Happens If I Buy a Car with an Encumbrance?
Let’s say you find a used car for a great price. The seller says it’s all good. You give them the money and drive away happy.
A few weeks later, someone knocks on your door — it’s the finance company. They say the car still has a loan on it. You didn’t do a finance check, so you didn’t know.
Now they want the car back, and you lose your money.
Scary, right? It happens more than you think.
Real Story: The Car Wasn’t Really Theirs to Sell
In Australia, many used cars are sold before the finance is paid off. Sometimes the seller is honest and tells you. Other times, they try to sell it fast and disappear.
That’s why you should never just trust someone’s word. Do your own finance check using the car’s VIN (Vehicle Identification Number).
Learn more about car risks in Aussie states here:
👉 Car Theft in QLD, VIC, and NSW: Know the Risks
How Do I Do a Finance Check?
A finance check is easy and only takes a few minutes. You just need the car’s VIN, which is a 17-digit number that tells you everything about the car.
You can find the VIN:
- On the dashboard near the windscreen
- Inside the driver’s side door
- On the car’s registration papers
Once you have the VIN, go to one of these trusted sites in Australia:
✅ Vin Check – vinverify.com.au
✅ REVS Check – revscheckonline.com.au
✅ PPSR Check – ppsrchecks.com.au
✅ Car History Check – carhistorycheck.net.au
These sites will give you a full car report, including finance check and if it’s been written off or stolen.
What’s in a Finance Check Report?
The report will show if the car has an encumbrance and give details like:
- Who the finance company is
- When the loan started
- How much is still owed
- If the loan is active or paid off
- If the car was stolen or written off
If it shows an active encumbrance — don’t buy it! Unless the seller agrees to pay off the loan first and proves it to you.
How Can I Stay Safe When Buying a Used Car?
Here are a few tips to protect yourself:
✅ Always do a finance check before buying
✅ Ask the seller for their ID
✅ Don’t pay cash until everything checks out
✅ Use a PPSR report to check the full car history
✅ If something feels off, walk away
Read more here:
👉 How to Use a PPSR Report to Catch a Stolen Car
Warning Signs of a Risky Car Sale
🚩 The seller is rushing you to buy
🚩 The price is way too low
🚩 They want only cash
🚩 They can’t give a clear answer about finance
🚩 The VIN has been scratched or replaced
Sometimes a car looks like a bargain, but it’s not. Learn more:
👉 Is That Bargain Car Too Good to Be True? It Might Be Stolen
What If the Car Has a Loan but I Still Want It?
If the car has a loan (encumbrance), and you still want to buy it:
- Ask the seller to pay off the loan first
- Get proof the loan is paid (ask for a “release letter” from the bank)
- Then do another finance check to make sure it’s clear
Only buy when the PPSR report shows no encumbrance.
Final Thoughts
A finance check is one of the most important things you can do before buying a used car. It helps you see if the car has an encumbrance — which is a fancy word for “someone still owes money on it.”
Don’t take chances. A cheap car could cost you thousands later if it still has a loan.
Do a proper finance check using trusted Aussie sites like: