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Who is the legal owner of a car on finance?

A car on finance legally belongs to the car finance provider until you’ve completed your payment plan. Once you’ve fully paid off the car it may belong to you, or you may have to hand it back to the lender - depending on your car finance agreement.

6 min read
man signing car contract

What is the difference between owning a car and being the registered keeper? 

If you purchase a car outright (with cash or a personal loan for example), you are the legal owner of that car. All of the legal documentation regarding the car will be passed over to you along with full ownership.

However, if you take out car finance, you will receive all of the legal documentation for the car including a V5 registration document that confirms you are the registered keeper (not the owner). In this case, the car will still be owned by the finance company.  

The registered keeper should be the person who is driving the vehicle the most – for both legal and safety reasons.

Usually, the person who is the registered keeper needs to be the one making payments for the car.

There are three different ways you can finance a car:

  1. hire purchase (HP)
  2. personal contract purchase (PCP)
  3. personal contract hire (PCH)

Who is the legal owner on hire purchase (HP)? 

Hire purchase (HP) is where a payment plan is used to spread the total cost of the car equally across several years. Once you reach the end of the payment plan the car belongs to you. Until then, it’s the legal property of the finance company. You will be the registered keeper in the meantime.

It’s also possible that you may be required to pay a lump sum at the end of your payment plan to finalise your purchase of the car. So, make sure you check the terms and conditions before you sign up.

Who is the legal owner on personal contract purchase (PCP)? 

A personal contract purchase (PCP) is similar to a hire purchase in that the total cost of the car is spread across a payment plan. You’ll be the registered keeper of the car as long as you’re the main driver. However, unlike HP, when you come to the end of your payment plan you have three options:

  1. give the car back to the finance company
  2. make a one-off final payment to the lender and become the car’s owner
  3. take out a new finance deal with a new car from the same lender by refinancing the old car

No matter which scenario you choose, the car legally belongs to the finance company until you’ve made the final payment.

It’s important to note that some companies impose an annual milage limit on the car to help preserve its value. If you exceed the limit, you will face fees.

Who is the legal owner on personal contract hire (PCH)? 

Personal contract hire (PCH) is where you pay a car finance company to hire out a vehicle for a number of months or years. You pay them a set amount each month and at the end of the lease you’ll need to hand the car back to the finance company.

Similar to a hire purchase and personal contract purchase, the finance company will legally own the car with personal contract hire. However, with PCH, there’s usually no option for you to buy the car at the end of your contract. You’ll be named as the registered keeper of the car and be given all the legal documentation when you sign up.

Who is the legal owner with a personal loan? 

If you take out a personal loan to pay for a car, you’re usually using the money you borrowed to pay for the car outright. This will make you the legal owner of the car as well as the registered keeper. You will be given all the legal documentation for the car and gain full ownership from the moment you purchase it using your loan.

Make sure you can manage your monthly repayments for the loan, or any type of car finance you take out, otherwise you could find yourself sliding into financial difficulty.

Can you change the name on a car finance agreement? 

The car belongs to the finance company until you have completed all the payments, so you won’t be able to change the name on the agreement until then. If you want to sell your car because you’re struggling to make payments, you won’t be able to do so.

However, you can hand the car back to the finance company - though you won’t get a refund. If you’ve paid less than half the agreed amount, or haven’t made payments on time, you may owe the company the difference up to half the full amount.

For example, if the car cost £10,000 and you have paid off £4,000, you may owe a further £1,000 if you decide to hand the car back – to bring your total payments up to £5,000 (which is 50%). 

If you find yourself unable to make your car payments you should contact your car finance provider to see if they can help. 

Can you insure a car if you aren’t the legal owner? 

You should still get car insurance if you’re the registered keeper (not the legal owner) – in fact it’s illegal not to. Your car won’t be insured by the car finance company, so you need to get car insurance.

Without car insurance you run the risk of both you and anybody else involved in an accident not being covered for any financial costs. If you’re involved in a car accident and you don’t have car insurance, you’ll have to pay for any costs out of your own pocket.

Many people now get cars on car finance or are given company cars as part of their work compensation package, so it has become more common for car insurance companies to accept applications from people who aren’t the legal owner. You may have to provide documentation that proves you’re the registered keeper of the car in order to get approved for car insurance.

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