New cars

Can I Sell a Car With Outstanding Finance?

Not everyone has the capability to walk up to a car dealer and pay for a car outright, meaning many people are now turning to the various ways of financing a car. Instead of owning the car there and then, the dealer retains the legal ownership of the car and you, assuming everything goes well, take ownership of the car after three years once your loan is paid off. But what happens if you get part-way through your agreement and you’re looking to move on? Let us guide you through the process of selling a financed car.

What is a car on finance? 

Finance is one of the most popular ways to buy a new car, and encompasses a range of options that means you borrow the money needed to buy the car outright, paying it back over an agreed period of time.

Can you sell a car on finance 

It is possible to sell a financed car, but in order to do so the outstanding finance must be settled with the finance company first. You’ll need to pay off the total finance amount, including any interest added, minus your initial deposit and repayments made over the contract term to date. If you are selling to a dealer, they will often pay this figure as part of your purchase, and if the price of the sale is greater than the settlement figure, they’ll pay the difference, however if your settlement figure is greater than the value of your car, you’ll need to pay them.

Can you sell a car on finance privately? 

If you are looking to sell your car privately, you will first have to settle the figure before you make any sales. If you do plan to sell the car with outstanding finance, you will have to make potential buyers aware of this from the outset.

Is it illegal to sell a car on finance?

You can only sell a car if you are its legal owner. If you have financed your car on either a hire purchase (HP) or personal contract purchase (PCP) basis, then the lender remains the legal owner of the car until your loan or contract is paid off in full. Both situations will offer some options for how to get out of your agreement early, but almost all will require you to make an early termination or balloon payment.

If the car has been bought by you outright using a personal loan, then you are the legal owner of the car and can do whatever you wish. You will, however, still be responsible for the loan and will continue to pay the monthly repayments.

Selling back a car on finance

If your circumstances change and you’ve found yourself in the position where your loan is no longer affordable, there is always the option to return the car back to the dealer. You can do this by ‘voluntarily terminating’ your agreement and, under Section 100 of the Consumer Credit Act (CCA), your rights to terminate your agreement before making a balloon payment (if you’ve got a PCP agreement) are protected. Under the CCA, you are only liable for the first 50% of the total repayment amount and if you have already paid over this amount, you’re not allowed to be changed any additional fees – although you will likely have to pay additional interest if there is any damage or you have put the car through more miles than your contract stated.

There is a second option to voluntarily surrender your car, where you allow the finance company to take the car back, and they are forced to sell the vehicle. The amount made from the sale can pay off the loan amount, but, as selling a repossessed car is not profitable, you will have to pay additional fees if the lender was forced to add to your contract on top of any interest. It will also have a negative impact on your credit rating, so make sure that voluntary termination isn’t an option before deciding to surrender your car.

What should I do if I want to sell my financed car?

If you are looking to sell your car but still have outstanding finance, it’s worth weighing up all of the possible options available to you. This can include finding the estimated value of your car, an estimate from the dealer and compare the value to the remaining repayments. If your car is worth more than the estimates then you should absolutely look at selling the car, however just remember that until the finance has been paid you are not legally the owner of the car, and any moves to sell the car is a crime.

For more hints, tips and general guides to keeping you and your car on the road, from your first lesson to your final sale, visit our Car Care guide. 

If you are looking to scrap your financed car rather than sell, then the team at Scrap Car Comparison will be more than happy to help you secure the best possible. Use our online quote generator to see just how much your car could be worth today.

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