Is it illegal to sell a car with finance outstanding?
Yes. It sounds obvious, but you can’t legally sell a car that you don’t own. With certain types of car finance you don’t own the car until you’ve made the final repayment. So, if you have outstanding finance on your agreement, you can’t sell the car.
However, you can end your finance agreement early so you become the legal owner of the car sooner. In order to do this, you’ll need to pay a settlement figure to the finance provider.
Can I sell a car with outstanding hire purchase finance?
If you have finance outstanding on your hire purchase (HP) agreement, you can’t sell your car. This is because the car remains the property of the finance provider until you’ve made your final repayment. Once you’ve repaid the finance in full (including any interest and fees), you become the legal owner of the vehicle and you’re free to sell it.
If you want to sell your car sooner, the only way to do so would be to end HP the agreement early by paying a settlement figure. You’d have to contact your finance provider to find out exactly how much you’d be expected to pay.
Generally speaking, it usually equals the amount you have left to pay on the car (including interest) plus any additional fees, such as an early repayment fee. Once this has been paid, you’ll legally own the car and can sell it.
Can I sell a car with outstanding personal contract purchase (PCP) finance?
As with HP agreements, you don’t become the legal owner of your car on PCP until you’ve made the final payment. Unlike HP, though, PCP agreements require a final ‘balloon payment’ to purchase the car. This is because the PCP monthly payments only cover the difference between the original value of the car and it’s depreciated value at the end of the agreement term.
The balloon payment is equal to the value of the car at the end of the agreement and is required in order to purchase it. As such, both the monthly repayments and the balloon payment must be made in full before the car legally belongs to you.
As with HP, the only way to sell your car if you have outstanding finance on your PCP agreement is to pay an early settlement figure. This figure will include the remaining monthly payments (including interest), plus the balloon payment and any other additional fees. Once you’ve paid the settlement figure, you’ll become the legal owner of the car and you’ll be able to sell it.
Can I sell a car with outstanding personal contract hire (PCH) finance?
You can’t sell a car if you have PCH finance, whether there are any outstanding payments. This is because PCH is a lease agreement, and so it works more like renting a car than buying one.
Under a PCH agreement, you never legally own the car and so you can’t sell it at any point. This is because your monthly repayments do not contribute towards the purchase of the car, but instead allow you the privilege of using it for the agreed period. As such, once the PCH term is complete, you must hand the car back to the provider.
You can end a PCH agreement early, but it’s likely that you’ll have to pay all your outstanding finance upfront if you choose to do so.
Can I sell a car with an outstanding personal loan?
If you use a personal loan to buy a car, you can sell it at any point, even if you have outstanding payments. This is because you own the car outright as soon as you drive it away if you’ve paid for it using a personal loan.
Remember, you will still have to make your monthly repayments until the loan is fully repaid (including any interest), even if you’ve sold the car. However, you could use any funds from the sale towards this if you wish.
How to sell a financed car
There are two things you must do before you can sell a financed car:
- request a settlement figure from your provider
- pay it in full
Until you’ve done this, you don’t legally own the car and you can’t sell it.
1. Request a settlement figure
You’ll need to inform your finance provider that you want to end your agreement early, and then you can request a settlement figure. The settlement figure will equal your outstanding payments (including interest) plus any additional charges, like early payment fees.
2. Pay the settlement figure
Once you’ve confirmed the settlement figure with your provider, you will then need to pay this in full to end your agreement. Your provider will be able to give you details on how to make this payment.
When the payment has been received, your provider will complete the transfer of ownership and then the car will legally belong to you. After this, you can sell it whenever you like.
What are the alternative options?
If you’re unhappy with your financed car but you can’t afford the settlement figure to end your agreement, there are other options.
1. Voluntary termination
Under the Consumer Credit Act 1974, you have the right to voluntarily terminate your agreement without paying additional fees. To do this though, you have to have paid off at least 50% of the total finance amount (including any interest) and the car must be in good condition. If you choose voluntary termination, you won’t own the car once you exit the agreement.
2. Part exchange
Part exchanging allows you to buy a new car and get rid of your old one in a single transaction. It can be a good option if you’re looking to change your car but haven’t fully repaid the finance on your current vehicle. This is because you can use your car’s value to cover your outstanding balance.
If your car is worth more than you owe, you can use the surplus amount towards your new car. However, if the car is worth less than you owe, you’ll have to pay the difference.
3. Continue paying your car finance plan
Getting out of your finance agreement early can leave you out of pocket, so in some cases it may be more cost effective to simply continue paying your finance plan. Whether you continue paying until it’s all paid off, or just until the early settlement figure is more affordable, sticking with your current repayments may be the best move in the short-term.
If you’re struggling to make your repayments, you should speak to your finance provider as soon as you can. They may be able to offer you a different payment plan to make your repayments more manageable.
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