Is it legal to sell a car on bail?

In Australia, sellers are not required by law to disclose that the car they are trying to sell has any financial baggage.

No, selling a car on bail is not illegal. 

Most people wouldn't bother taking out an auto loan just to turn around and go through the hassle of trying to sell a used car for financing, but life happens and circumstances change. It is completely legal to sell a car on bail, but it can be tricky and there are a number of things you need to know before doing so. This article will not cover general advice related to selling a car on credit, but will focus on the legal aspects. 

In Australia, sellers are not required by law to disclose that the car they are trying to sell has any financial baggage. According to the NSW Fair Trading guide for car buyers, it is the buyer's responsibility to ensure that the vehicle is not encumbered (funded), stolen or deregistered in a private sale.

This applies throughout the country. The buyer is responsible for their own due diligence before selling, and your only real legal protection against unknowingly taking on someone else's old car loan obligations comes in the form of the Personal Property Securities Act.

Under this law, if you check the vehicle you wish to purchase against the Personal Property Securities Registry and find that no security interests (existing financial obligations) are attached to the vehicle, you can protect yourself by purchasing a certificate that documents this and purchases said vehicle on the same day or the next day.

If you follow this process, then you are legally protected from liability for any hidden loans or financing that you may discover later, and you do not have to worry that one day you will wake up and find that "your" car has been seized. You will have title to the car without encumbrances.

Also remember that buying a financed car can affect your insurance. Youi Insurance Company has a helpful article detailing what can happen after buying a vehicle that is financially indebted in terms of insurance. In a nutshell, if you don't follow the PPSR process to be protected as a consumer under Australian law, you may end up finding out that your car has a financial obligation once you make an insurance claim.

Imagine applying and watching your payout go to a lending institution that has more legal rights to receive a payout than you! Unfortunately, this is a situation that can and does happen, so do your due diligence before buying a car from a private seller. And if you're selling, do the right thing and don't take advantage of the buyer's naivety and the bias of the legal system in your favor. Inform that your car is under financing and arrange a win-win situation for you and the buyer.

This article is not intended as legal advice. Before selling or buying a vehicle using the information collected here, you should contact the appropriate local authorities to ensure that the information written here is appropriate for your situation.