Used cars before you buy – who owns the car

Check the car seller is the owner on the registration certificate. A stolen car may be forfeited and returned to the correct owner. Determine if a private seller has clear title or there is a security interest over the car e.g. a finance company. The VicRoads Vehicles Security Register (VSR) can supply these records. Obtain a certificate from the VSR. Find out if the sheriff’s office has a warrant over the car.

Certificate of registration

Unless you are buying a used car from a licensed motor car trader, you must check that the person selling the car is the registered operator, or has the authority of the owner to sell the car. You should ask the seller to produce the car’s registration certificate (this is issued to registered operators with each renewal of registration).

If the seller cannot find the certificate or it has been destroyed, they can apply to have a (replacement) certificate issued (reg 42 RSV Regulations). In order to check that the person named on the registration certificate is the same as the person from whom you are buying the car, get some photo identification from the seller, such as a driver’s licence.

If you buy a stolen car, you may be forced to give it back to the true owner. Although you could try suing the supposed seller for the return of the money paid for the car, you are unlikely to recover it.

When a motor car trader acquires a car, its registration is transferred into the trader’s name; however, the trader may end up selling the car before this has occurred. If the trader is not recorded as the registered operator of the car, you should ask for proof that the trader acquired the car from the registered operator. Ensuring that a seller is authorised to sell the car is not as crucial if the seller is a motor car trader, however, as you may be entitled to compensation from the Motor Car Traders’ Guarantee Fund if the trader fails to transfer good title to the car (s 76 MCT Act).

Certificate of registered security interest

As well as checking ownership of a used car, you need to check whether anyone else (e.g. a finance company) has a security interest over the car. This only needs to be done if you are buying the car privately (motor car traders are prohibited from disposing of a car without first cancelling any security interest in it (s 48 MCT Act): penalty of 100 pu or 12 months jail (see also s 7(2) CSA).

If the seller owns the car outright, and no one else has an interest in it, the seller is said to have clear title to the car.

The PPSR records details of security interests against motor vehicles and it indicates whether or not there is a security interest over the car.

The PPS Act orders the priorities of the person possessing the car and of any people who have security interests. The PPSR lets you see who, apart from the seller, has a claim over the car that must be satisfied before you can obtain clear title to it.

A purchaser will normally obtain clear title to a car unless a security interest (held, for example, by a bank or finance company) is registered on the PPSR. If that interest is registered, then the purchaser’s title will be subject to the priority of the registered security interest. Consequently, if you are buying a used car privately, you must inspect the PPSR, otherwise you risk losing the car.

To obtain information from the PPSR, you must give the car’s VIN or chassis number. Make sure you get these details directly from the car, not from the seller. Check that these details match the details on the registration certificate, before calling the PPSR.

If, on inspecting the Register, you find that the seller does not have clear title to the car, you should not enter into a contract to buy the car (unless prior to, or as a part of, that contract the seller satisfies the claim that the security interest holder has on the car. You should ensure that this aspect of the contract is in writing, and not rely on a mere verbal assurance by the seller that the security interest will be discharged). You should contact the security interest holder directly if unsure about the seller’s arrangements and, if doubts remain, look elsewhere for a car.

To protect your interests and ensure proof of inspection of the PPSR prior to purchase, you must get a certificate from the PPSR (containing information from the register about the car to be purchased) before handing over any money to the seller.

When inspecting the certificate, ensure that the correct car has been identified on the certificate and that there is no other security interest holder.

Currency of the certificate

A certificate issued by the PPSR will only show security interests registered at the time the certificate is issued. Any delay in purchasing the car will reduce the protection given by the certificate, as a security interest could be registered in this time. You should therefore get a fresh certificate if there is any significant delay.

Exceptions

Liens

The PPSR does not apply where the person who holds the security interest is in possession of the car immediately before the time of sale.

This most often occurs with repairer’s liens. A repairers’ lien is the right of a motor vehicle repairer to keep possession of a car until they receive payment for repairs made to the car.

Sales by court order

The PPSR does not apply where the car is sold as a result of a court order obtained by a creditor of the owner. This is usually a sale by the Sherriff’s Office to enforce a court order for payment of a debt owed by the owner of the car.

Notice

The PPSR does not apply if the purchaser knew of, or is regarded by law as having knowledge of, the security interest.

Inventory

The PPSR does not apply where the purchaser holds the car as inventory for themselves or someone else. This usually happens when a car dealer has possession of cars in the car yard that have not been fully paid for by the dealer. This exception only applies where the dealer buys the car, not to a consumer who buys the car from the dealer.