Beware of buying a car with an outstanding logbook loan

Beware of logbook loan scams when buying cars from private sellers. You could find yourself with an outstanding debt to settle for money you didn’t even borrow, for a car you’ve just bought!

New carSince the beginning of 2014 the Citizens Advice Bureau has been campaigning for a change in the law surrounding Logbook Loans.

Logbook loans are a form of secured borrowing, the security being your car. They’re not unlike payday loans – which have also received a lot of negative press – in that they offer a small amount of short term borrowing for a large interest sum.

Since the loans are secured on your car (hence the logbook part of the loan) if you do not repay the loan in full or on time, your car is at risk of repossession. This is all well and good if you are the person who has taken the loan. But what if you’ve just bought the car?

When you buy from a private seller you are at risk of purchasing a car with a log-book loan secured on it. If this is the case, you may well find you receive a knock and the door and some debt collectors looking to take your car away. See the example of Paul Brewin here on the BBC newsbeat website.

Paul had carried out the necessary checks before purchasing the car, but the logbook loan did not show up. Finance companies are not obliged to record their interest with the agencies that hold this data – so they still have a rightful claim to ownership of the car even if you’ve just bought it.

The best way to stay safe when buying your next car

Buying privately

If you’re going to buy privately make sure that you can trust the person you’re buying a car from. A lot of this will come down to experience but there are a few things to look out for:

  • Never buy a car that doesn’t have the full V5C registration certificate (we call this the logbook)
  • Never buy a car from a private seller that isn’t selling from their house (check the address matches the logbook)
  • Always perform a vehicle data check before purchasing (from companies such as HPI or Experian – reputable companies offer insurance that their data is up-to-date and correct)
  • Watch our for home-traders masquerading as private sellers – if they’re lying about being a dealer, what else are they hiding? (When you call always ask about “the car” rather than being specific, this will catch out many unwitting phoneys)

Buying from a dealer

Buying from a dealer affords you many more rights than buying privately.

You can be sure any car you buy from a reputable dealer will be clear of finance (including logbook loans), not written off (unless declared to you) and not stolen. On top of those fundamental checks you can also be sure you’re buying a road worthy car free of any major faults – these rights don’t apply to private sales.