Repossession is a finance company's legal right to seize a vehicle when the loan is in default. For Australian vehicle finance, repossession rights are governed by the Personal Property Securities Act 2009 and the relevant state-based credit legislation.
How repossession affects buyers
A PPSR-registered security interest survives the sale of the vehicle. If you buy a car that has an outstanding loan on it (an "encumbered" vehicle) without knowing, the financier can still repossess the car from you to recover the previous owner's debt.
The financier doesn't have to compensate you. Your only recourse is civil action against the seller, which typically fails because the seller has disappeared with your money.
How to avoid this
A PPSR check before purchase reveals any registered security interests against the vehicle. Aussie Car Check Essentials ($19.99) includes the PPSR extract and shows:
- Whether any security interest exists
- The secured party (typically the lender)
- The date the registration was lodged
If the report shows an encumbrance, do not pay the seller in cash. Either pay the lender directly to clear the debt (then pay the seller the balance) or walk away.