Aug 22 (newsonjapan.com) - Buying a used car is the best option for those who want to get a new car without breaking the bank. It’s practical and you get to choose from a wide range of cars. However, buying a used vehicle comes with risks.
Used cars have histories that sellers might try to hide from you. If you don’t double-check their stories using car history reports, they could come back to bite you in the bum.
One of the biggest risks that come with buying a used car is encumbrance.
What is an encumbered car?
Encumbered is a term used by banks to describe items (in this case, a used car) owned by a bank or another entity. Second parties have the right to claim these items.
For cars bought through a bank loan or any other financing option, the legal owner of the car will be the lender until the borrower has fully paid the loan.
If a car is encumbered, it can mean two things. It’s either the car loan hasn’t been fully paid, or the car was used as collateral.
Either way, an encumbered vehicle means trouble for buyers of used cars.
Why does financial encumbrance matter?
Encumbrance matters because that used car you’re going to love can be taken away from you.
Let’s take a look at an example. Steve got a nice car using a loan. However, Steve stopped paying the loan and decided to sell his car.
Now you have been eyeing Steve’s car for some time, so you decided to buy it. You’re now in cloud 9.
However, the lender realized that Steve stopped paying his loan. Steve told them that he already sold the car. As a result, the lender comes to take the car away from you. Bad Steve. Poor you.
How can I check whether the vehicle is encumbered or not?
The best way to find out if a used car is encumbered or not is through getting a revs check report.
You can go to a reputable car history report website, type in the VIN (vehicle identification number), pay online, and voila! You got yourself a detailed car history report containing information about the vehicle’s encumbrance.
How can I avoid buying an encumbered car?
The answer is simple. Always get a car history report before buying any secondhand car. No matter how much the seller reassures you that the car is not encumbered, get a report anyway.
Remember, paying for a comprehensive vehicle report is better than losing money over an encumbered car.
What should I do after buying an encumbered vehicle?
Tell the seller that he or she should pay the loan. After that, the title can be transferred to you.
If not, then you can pay the loan and ask the seller to pay you back gradually or when they have enough money. This is an extremely risky move, but if you still believe in the goodness of humanity, go for it.