Selling Your Financed Vehicle
Selling a car when you own it can be a fairly simple process, but for those looking to sell a vehicle which has finance attached to it, it can be a little bit more confusing. It’s important to fully understand the legalities that surround you doing so.
Is It Legal To Sell A Car With Finance?
The law stipulates that it is illegal to knowingly sell a vehicle before the finance has been paid off. This is because until the finance against a vehicle has been paid off it is technically still the lender’s property and, as I’m sure you’re aware, selling other people’s belongings is very much illegal. But that doesn’t mean that you can’t sell a car with finance, it just means that before you proceed with selling the vehicle and handing it over to the new owner, you need to pay that finance off.
The good news is that we can help you to clear your debt and enable the vehicle to be sold legally.
Understanding The Different Types Of Finance.
Finance is often used when people want to purchase a vehicle, but do not have the upfront funds to do so. There are a variety of different finance types available and they usually fall into one of the following categories:
Hire Purchase Finance:
This style of finance means that the lender owns the vehicle and that is considered as hired until all of the loan, including the ‘option to purchase’ fee, has been fully repaid. After this has been paid the ownership of the vehicle will transfer from the lender, to the purchaser.
Credit Sale Finance:
This type of finance is an agreement between the purchaser and the lender where both parties agree that the full payment will be made in the future, either in one lump sum or broken down into smaller payments which will be paid regularly over a certain period of time. From the time the arrangement is made the car belongs to the purchaser.
Conditional Sale Finance:
This style of finance means that the full title of the vehicle remains the property of the finance company until certain conditions are met. These conditions mainly include car payments being made for the car on time, but there may also be some conditions in place covering the maintenance of the vehicle and insurances. Until the outstanding debt has been paid, the finance company still owns the vehicle.
Credit Sale Finance:
This type of finance is similar to other credit agreements in the sense that ownership of the vehicle goes straight to the purchaser at the start of the agreement. The seller of the vehicle will have all the information regarding this type of finance and will be able to clarify details should it be needed.
Lease Or Contract Finance:
Lease or contractual finance mean that the ownership will always remain with the lender. There isn’t usually an option for the vehicle to be purchased and instead every two to three years there is an option for the vehicle to be changed or upgraded, and as a result the payments made for finance cover the depreciation of the vehicle.
Personal Contract Purchase Finance:
Under this type of finance the lender owns the vehicle until all of their conditions, such as all payments being made, are satisfied. Usually there is a larger payment required at the beginning or end of a vehicle’s finance and once the contract has come to an end there will be three options; pay the outstanding amount, exchange the car, or return the car to the supplier.
How To Sell A Car With Finance
When looking to sell a vehicle with outstanding finance, it’s important to remember that until the car’s finance is paid it doesn’t actually belong to you. It’s against the law to knowingly sell a vehicle with outstanding finance attached to it and as all companies register finance on HPI and Experian databases to protect buyers, it’s easy to find out if this is the case. In addition to this, if a vehicle is sold on with unpaid finance attached to it, the company can track down the new owner, repossess the vehicle and the new buyer will be able to sue the person who sold it to them. In addition, the seller faces the possibility of fraud charges… So it’s really not worth trying to sneak unpaid finance past somebody when selling a vehicle!
Paying off a vehicle’s finance can be done by either finishing the course of your contract and ensuring all payments are made, or by contacting the lender of the finance agreement and asking for a ‘settlement’ figure. A settlement figure is the amount of money you’ll need to pay off your loan in full. This figure doesn’t usually include any interest from future payments, but may include: a cost-recovery fee, a break fee and an administration fee. If this sounds a little overwhelming, there is a legal and easier option!
Simply input your vehicle’s details and postcode into our price comparison form. Our free service will then compare specialist buyers on our national network to find you the most competitive price instantly. Once you have been offered a price there are two options for how you can proceed:
- If you are offered a price that is higher than the amount of finance left outstanding on your vehicle, we can arrange to pay off your settlement agreement directly with the finance company which will allow for the legal sale of your vehicle. This means that the vehicle’s finance will be paid off in full and you’ll be left with the remaining money.
- If you are offered a price that doesn’t cover the amount of finance outstanding on your vehicle, you would need to pay off the difference before we would pay off the remaining balance. This would leave your car sold and finance free with no payments remaining!
In certain circumstances, such as if a vehicle has been damaged or devalued, some providers may agree to remove the encumbrance from the vehicle. This is usually done when a lender is willing to transfer the remaining balance of finance, to a personal loan. During this process the ownership of the vehicle would be transferred to you and the encumbrance would be lifted, which would leave the vehicle free to be sold legally.
Important Legal Information
It’s important to know that if you ask for a settlement agreement, legally, all finance companies must give you one. If the company you took out your finance through refuses to give you a settlement agreement you can contact the government’s financial ombudsman.
Please note that if you cannot pay off the settlement agreement then there is no other legal way of selling your car. Whether you’re looking to sell your vehicle privately or commercially if there’s finance or hire purchase outstanding, you will be unable to do so.