How to check if a car has outstanding finance

When buying a used car, you might be at risk of choosing a vehicle with outstanding finance. The good news is that you don’t have to simply cross your fingers and hope for the best; there are several paid online services available that can offer an outstanding finance check.

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The good news is that you don’t have to cross your fingers and hope for the best when buying a used car. There are several online services available that can offer an outstanding finance check. Also known as an HPI check, these services can give you the peace of mind you need before committing to a purchase.

Most companies will require you to enter the car’s registration number and pay a fee typically ranging from £10 to £30 depending on the type of check you choose. In some cases, used car dealerships may also offer an outstanding finance check as part of their service.

What is outstanding finance?

Outstanding finance is the term used to describe a car that’s been purchased using a loan that’s not yet been fully repaid. The finance will remain outstanding until it’s fully repaid, either when your deal comes to an end or by settling the loan early. A car with outstanding finance shouldn’t be sold to someone else. In fact, if you knowingly sell a car before you’ve cleared the loan, you may be found guilty of fraud.

Is it illegal to sell a car with outstanding finance?

Yes, knowingly selling a car with outstanding finance in the UK is illegal and could be categorised as fraud. This is because you aren’t the legal owner of the car yet; with both a hire purchase (HP) and personal contract purchase (PCP) loan, the finance provider will own the car until you’ve finished making all your repayments (and paid the final balloon payment with a PCP), or settled the finance early.

Instead, you’ll be the car’s registered keeper throughout your loan term. As the registered keeper, you’re responsible for any repairs, tax, and MOT charges, but as you don’t own the car, you won’t be able to make any major modifications, trade it in as a part exchange, or sell it.

What happens if I buy a car with outstanding finance?

When buying a used car, especially from a private seller, you might not have access to all the information you need. Missing paperwork, misleading descriptions, and a good salesperson could prevent you from making a fully informed decision. If you unwittingly buy a car with outstanding finance, you have the right to keep it, assuming you can prove that you didn’t know there was finance owing. This is known as acting in ‘good faith’.

The finance provider – as the car’s legal owner – will likely want to claim back the outstanding balance owed to them. In most situations, they’ll look to pursue the person who originally agreed to the loan and sold you the car, but there is a chance that they might ask you to cover the remaining payments. In that case, you could be at risk of losing both the car and the money you paid for it, so you may want to consider seeking independent legal advice.

What do outstanding finance checks show?

Different outstanding finance check services will be able to provide different information, but they should tell you whether any money is owed on the vehicle. Most will also tell you the name of the finance provider, the date that the agreement was signed, the type of car finance, and the loan term. If you opt for an enhanced check, which may cost more, you could also be able to find out how many previous owners the car has had and details of its MOT history.

How can I sell a car with outstanding finance?

Car finance agreements typically last between two and five years and a lot may change in that time. You might change job, have a child, or experience issues with the running of your car – various reasons could lead you to want to sell your car before the loan term ends.

But don’t worry, it’s not impossible to sell a car before reaching the end of your car finance agreement – you’ll just need to settle the finance first. Start by requesting a settlement figure from your finance provider. This is the amount you’ll need to pay to end your loan and take ownership of the car. It is typically made up of your remaining finance, minus any interest, plus any administrative and early repayment charges. Once you’ve paid this and become the car’s legal owner, you’re free to sell it privately or trade it in at a dealership.

Selling a car with HP car finance

With a HP car finance loan, you’ll typically put a deposit down upfront and then make fixed monthly payments for between two and five years. Once you’ve finished making all your repayments and paid the Option to Purchase admin fee, you’ll become the car’s legal owner.

If you wish to sell a car with outstanding HP finance, you need to pay a settlement figure first. If you’re hoping to sell your car to a dealership, they may offer to pay this on your behalf. 

Selling a car with PCP car finance

If you have a PCP car finance loan, you won’t become the legal owner or be able to sell the car until you’ve made all your monthly repayments and paid the optional one-off balloon payment. But you don’t have to wait until the end of your agreement to buy and sell the car. You can contact your lender at any time to request a settlement figure and find out how much you’ll need to pay to take ownership of the car.

Unlike HP, there is the option to simply hand the car back and walk away if you wish, without paying the full amount.

Can I sell a car I’ve bought with a personal loan?

Personal loans work differently from other types of car finance, as you will become the legal owner of the car as soon as you’ve used the loan to pay the seller in full. You’re free to do whatever you like with the vehicle:  you can keep it, make major modifications, give it away to a friend or family member, or sell it – the choice is yours!

What is voluntary termination?

If you have outstanding finance to pay but can no longer afford to make your repayments, you may want to opt for voluntary termination. Under UK law, you have the legal right to terminate your car finance agreement if you’ve already paid 50% of the total amount payable.

With a PCP loan, you’ll need to have repaid 50% of the total amount payable, including the balloon payment and any interest and fees. However, you don’t need to wait until you’re halfway through your agreement to start a voluntary termination. It’s always 50% of the total amount payable, not the loan term. So, you could make up the difference to reach the 50% threshold early, if affordable. 

If you’re eligible, you can send a letter to the lender to notify them that you wish to opt for voluntary termination, pay any outstanding fees, hand the car back, and walk away.

Does voluntary termination affect my credit score?

It won’t affect your credit score. A note will be left on your file, but it won’t say why you chose to end the agreement early. Even so, it’s best not to get into the habit of voluntarily terminating finance agreements, as finance companies may interpret this as a sign of long-term financial difficulties.

How can I trade in a car with outstanding finance?

Before you can trade in or part exchange a car with outstanding finance, you’ll need to settle the loan. Whether it’s the right option for you depends on your individual circumstances and needs.

If your car is worth more than the settlement figure, the dealership may offer to settle the finance on your behalf and use the equity as a deposit towards your new vehicle.

However, if your car is currently worth less than the settlement figure, you’ll be in negative equity and may need to pay the dealership to make up the difference before the part exchange can be completed. 

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*Representative example: Borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. Rates may differ as they are dependent on individual circumstances. Subject to status. We're a credit broker, not a lender.

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