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Selling a Car with Outstanding Finance

Old models, change of base, and financial issues are some of the reasons people sell their cars. Are you looking for tips and steps on where or how to sell a car? How much will you get, and what are the steps in selling a car under car finance or loan?

Here Carplus will tell you everything about how car finance affects selling a car with outstanding finance, and if it’s legal. If you need help with car finance, their mission is here to help you get the car you want.

Is It Illegal to Sell a Car with Outstanding Finance?

There are different ways to sell your car, such as selling it privately, where you can get more than 10% for your car. Remember that you can only sell a car legally if you have full ownership.

If you plan to sell your car through a dealer, you have to choose between car exchange and selling outright. The amount also depends on the car’s trade value and condition. You can also sell your current car in auctions or online by submitting details to the car-buying website to receive a valuation and taking it to the local depot to be assessed.

There are two things you should do first before legally selling it.

  1. Contact the finance company and ask for a settlement figure or the total amount you need to pay, including charges like an exit fee.
  2. Pay the settlement figure and any early payment plus admission and exit fees charged by the lender within the settlement date.

How to Check Whether a Car Has Outstanding Finance?

Car finance and loans became so popular that buyers bought over 2.4 million cars on finance in 2018. If you are a buyer and found out that you bought a car with outstanding finance, you can keep it.

It’s called “Good Title,” meaning you purchase the car with outstanding finance without knowing the situation. But keep in mind that the finance company might contact you to ask for information and papers you should comply with and submit.

History check is a service offered by companies to get essential details about the vehicle. A history check is about outstanding finance and all the car’s history you are buying or selling.

It’s advisable not to buy a car with outstanding finance unless the seller agrees to pay off the loan and provide proof.

Can you Sell a Car with Outstanding HP or PCP Finance?

Outstanding finance is the sum of unpaid money on a vehicle in Personal Contract Purchase (PCP) or Hire Purchase (HP) contracts. It’s illegal for anyone to sell a car with outstanding finance to a buyer without telling them the situation.

Hire Purchase Finance (HP)

You cannot sell or trade a car with an outstanding hire purchase contract since the lender maintains the ownership of the vehicle until you paid it all off. There are ways to end the outstanding hire purchase contract early that will not affect your credit rating.

Return the car if you have paid less than half of the agreed loan or half of the car’s value and cancel the purchase agreement by the voluntary termination in your termination clause.

Personal Contract Purchase (PCP)

Like in HP, you don’t legally own your vehicle in a PCP contract, meaning it’s illegal to sell it. If you already paid half of the agreement figure, including interest and fees, check your contract for a voluntary termination clause and early exit fee.

Returning the car is also accepted with the same terms as HP. The lender will only give full ownership of the car once you settle your contract by paying the settlement value plus interest and early exit fee to your finance company within the settlement date.

What If All Else Fails?

A car dealership is where the dealer will check and require an updated settlement figure for your car finance. Some dealers pay the settlement directly to the finance company if it’s only less than the value of your car. After that, there are two options – dealers either pay you the surplus or use it as a deposit for a new car. Another way is by refinancing the deal for your next car. But first, you have to know if your current car finance is in negative equity.

Compare the values and think if you want to proceed or hold on to your vehicle. If you decide to get the deal, start looking for a new car and discuss refinancing options with the lender. If approved, your new finance deal will include the settlement figure of the existing finance along with the new loan.

As for the buyer, since it’s not legal and advisable to buy or sell a car with outstanding finance, there are chances that the finance company will not accept any of your demands. The company might insist and try to recover the car.

But if you are confident to have a good title to the car with enough proof, you can send a complaint to them and contact Citizens Advice and Financial Ombudsman. You should also consult a solicitor for advice about legal action to reclaim the vehicle or your money.