Buying a Car? Don't buy into a nightmare!

Buying or leasing a vehicle is often a significant purchase.

Whether you are buying for commercial or private use, the Personal Property Securities Register (PPSR) is an important tool to help ensure you don't buy into a nightmare.

What is the PPSR?

The PPSR is a national register of security interests over personal property. Personal property includes most kinds of property, such as motor vehicles, watercraft and aircraft (formally this is known as collateral). A security interest is a legal interest in that property, which can arise when a purchaser buys the property on finance terms, or enters into a lease in respect of the goods.

The PPSR commenced operation in 2012 and replaced multiple state and national registers.

Run a PPSR Search before committing to a purchase or lease

Running a PPSR Search is an important step before committing to a purchase or entering a lease. If you are purchasing or leasing the vehicle from a dealer, the dealer should be able to provide you with a PPSR search extract. Otherwise, you can search the vehicle's VIN (Vehicle Identification Number) on the PPSR website.

If the dealer or the vendor is providing you with a search extract, check the date the search was performed to ensure it is up to date and that the VIN exacty matches the VIN of the vehicle you are purchasing or leasing.

The PPSR Search Result will tell you if there is a registered security interest over the vehicle. It also contains information about whether the vehicle has been reported as stolen or written off, or is subject to the Takata Airbag Recall program. If the search reveals any of these indicators, further investigation may be needed before committing to the purchase or lease.

For example, if a current security interest is shown on the search, the secured party may still have a legal interest in the vehicle. For example, if there is unpaid finance from the previous owner and the previous owner defaults on they payment, the financier may be legally entitled to seize and sell the vehicle to satisfy the debt. In this case the rights of the registered secured party may take priority over your own.

Buying a vehicle on finance terms or leasing

When buying or leasing a vehicle, it is common for the financier or lessor to secure their interest by registering on the PPSR. In these circumstances, it is important to check the contract carefully to identify what security interest is being given, and how long it lasts. It may be necessary to consider taking legal advice, particularly in complex scenarios.

Usually, the lessor or financier will be required to give you a Financing Statement once the PPSR registration is recorded. The Financing Statement will contain important details including the PPSR Registration Number, expiry date, collateral and details of the secured party (lessor or financier) and the grantor (borrower or lessee).

When the finance term ends, the lease expires, or if you intend to sell the vehicle, you may need to ask the financier or lessor to discharge the PPSR Registration. This is an important step if you intend to sell the vehicle, as a proposed transaction could be delayed or prevented by a lingering PPSR security interest.

What if you are the financier or lessor?

If you are providing finance for, or leasing out, a vehicle, it is important to protect your interest. The risk of not doing so is the loss of the vehicle to another creditor, or the inability to seize the vehicle or recover compensation if the other party defaults or goes into liquidation or bankruptcy.

To be effective, there are several requirements that must be met including:

• there must be a legally enforceable contract (known as a security agreement) that creates and defines the security interest;
• the security interest must be correctly registered on the PPSR when required (known as perfection) - timing can be critical in some situations;
• the parties (secured party and grantor) must be correctly identified - both in the contract and in the PPSR registration;

It is also worthwile running a PPSR search on the vehicle to identify any other security interests that might be recorded. Generally, earlier registered interests will take priority over later ones. If an existing security interest is identified it may need to be discharged.

Although registration fees are inexpensive, it is appropriate to consider obtaining legal advice before entering into a lease or sale transaction.