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Old 11th October 2010, 14:24   #1
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Default Exchange a car under loan?

Hi,

Sorry for the dumb question, but I could not find any specific threads or posts on the same.

I am wondering if a car that is under loan can be exchanged for another car, or otherwise sold to something like a TrueValue outlet? Is this possible at all, if so is it only within the same brand that such offers are available?

For example:

1> A person who buys a Maruti car with 3 year loan tenure wants to go for a bigger car half way through the tenure. Does the vendor have any exchange scheme whereby they take care of buying out the older car (with loan) and selling the newer one?

2> A person wants to sell the car while still under loan, to buy another brand. Or some recession etc means the person does not want to keep the car, and yet does not want to default and can't prepay the balance principal. Will a Maruti Truevalue outlet buy back the car under loan?

I understand that this might not make financial sense, given the prepayment charges, processing charges, depreciation, and greedy valuation by the dealers, but was just curious about the possibility.

Last edited by chncar : 11th October 2010 at 14:26.
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Old 11th October 2010, 15:02   #2
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The typical process + suggestions:
Process:
1. As an owner one can sell a car whenever one wants to.
2. As soon as one plans to sell, one would mandatorily need to inform the loan authority about the proposed sale and pre-close the loan - this normally attracts a pre-closure penalty of 4-5% depending on the deal that one struck originally.
3. Check the original loan papers for this detail or call the loan authority.
4. They will then give one the final amortization/ pre-closure statement as on a particular date and valid until a particular date, within which date one needs to complete the transaction, pay off the loan and take hold of their receipt/ clearance/ no dues certificate.
5. One would also in tandem with the above, need to keep the potential buyer/ true value company/ used car dealership etc informed of the same.
6. Typically the buyer will issue their cheque to the loan authority upto the value of pre-closure agreed amount including penalty etc and only pay one a cheque for the remainder amount.
7. One needs to submit the clearance/ no dues certificate from the loan authority for the transaction to go through with the buyer.
Suggested:
8. The vehicle and its original documents should only be given to the buyer after the amount is credited into the bank if it is a cheque/ or one has received the amount in hand if it is a cash payment. If it is a DD, then one can do an Over the counter transaction.
9. One also needs to make the necessary arrangements to transfer the vehicle by ensuring all forms are provided and signed off. It is actually the seller's responsibility to see it through right upto the transfer of ownership and take a proof of the same.
10. Typically if one sells to a True Value type company, one need not worry about these formalities because they will take care of the same, but if one is selling to a private party it is better to see the transaction right through.
11. Also typically one should not sell under pressure - one ends up getting a lousy deal.
12. However, if one simply cannot afford to pay the EMI, then it is better to come clean to the loan authority, sell the vehicle in the open market for the best price and payback the dues completely and immediately thereby removing the liability.

Quote:
Originally Posted by chncar View Post
Hi,

Sorry for the dumb question, but I could not find any specific threads or posts on the same.

I am wondering if a car that is under loan can be exchanged for another car, or otherwise sold to something like a TrueValue outlet? Is this possible at all, if so is it only within the same brand that such offers are available?

For example:

1> A person who buys a Maruti car with 3 year loan tenure wants to go for a bigger car half way through the tenure. Does the vendor have any exchange scheme whereby they take care of buying out the older car (with loan) and selling the newer one?

2> A person wants to sell the car while still under loan, to buy another brand. Or some recession etc means the person does not want to keep the car, and yet does not want to default and can't prepay the balance principal. Will a Maruti Truevalue outlet buy back the car under loan?

I understand that this might not make financial sense, given the prepayment charges, processing charges, depreciation, and greedy valuation by the dealers, but was just curious about the possibility.
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