What to Know About Selling Your Car with Outstanding Finance

Selling a car with outstanding finance can be a tricky process, but it’s certainly possible if you understand the necessary steps and legal implications. Whether you're looking to upgrade or need to sell quickly, here’s everything you need to know about selling a financed car in the UK.

Can You Sell a Car with Outstanding Finance?

In short, yes, you can sell a car with outstanding finance, but you’ll need to pay off the remaining amount on the finance agreement before the ownership can be legally transferred to the buyer. According to UK law, you cannot sell a vehicle with an active finance agreement unless the finance company gives permission or the debt is settled.

Most buyers will want to know that the car is free from finance, so settling the agreement is essential for a smooth transaction.

Understanding Different Types of Finance Agreements

Different finance agreements have unique terms, and it’s essential to understand these before selling. Here’s an overview of the three most common types of car finance agreements in the UK.

1. Personal Contract Purchase (PCP)

With a Personal Contract Purchase (PCP), you make monthly payments over a fixed term. At the end of the term, you can either:

• Pay a balloon payment to keep the car,
• Return the car with no extra fees if it’s within the agreed mileage and condition, or
• Part-exchange the car for a new one.

To sell a car on PCP, you’ll typically need to pay off the settlement figure.

2. Hire Purchase (HP)

With Hire Purchase (HP), you pay an initial deposit and then make monthly payments. Once the term ends, you own the car outright. However, until the final payment, the car belongs to the finance company, so you’ll need to settle the balance before selling.

3. Lease Agreements

A Lease Agreement is essentially a long-term rental, so you never own the car. If you want to end a lease early, you’ll typically face termination fees. Selling a leased car isn’t possible since it doesn’t belong to you, but you may be able to transfer the lease to someone else.

Steps to Selling a Car with Outstanding Finance

1. Contact Your Finance Provider: Inform your finance company that you intend to sell the car. They’ll provide you with a “settlement figure,” which is the amount required to pay off the finance.

2. Obtain the Settlement Figure: You can usually request this by phone or email. This amount may be different from the balance left on your finance due to interest or early repayment fees.

3. Decide How to Pay Off the Finance: Depending on the settlement amount, decide whether you’ll pay it off directly, include it in the sale price, or pursue other options.

4. Ensure Legal Transfer of Ownership: Once the finance is settled, confirm with the finance provider that the car is free from finance, and obtain documentation to show potential buyers.

Checking Your Settlement Figure

Your settlement figure is the amount needed to fully pay off your finance agreement. This figure is only valid for a limited time, typically 10 days. Make sure you have an up-to-date settlement figure before proceeding with the sale.

To check the settlement figure:

• Log into your finance provider’s online portal,
• Call their customer service, or
• Check any recent statements or correspondence.

Options for Selling a Financed Car

Here are three main options for selling a car with outstanding finance in the UK:

1. Pay Off the Finance

You can pay the settlement figure yourself, either with savings or a loan. This clears the finance, making it easier to sell the car privately or to a dealership.

2. Part-Exchange the Car

Some dealerships allow you to part-exchange your financed car for a new one. The dealership may settle the remaining finance amount and put any positive equity toward the new vehicle.

3. Sell to a Dealer or Online Buying Service

Some dealers or online car-buying services will handle the settlement process for you. They’ll pay off the finance directly and deduct it from the offer they make for your car.

Things to Watch Out For

• Early Repayment Fees: Some finance agreements include fees for paying off the balance early. Check with your finance provider to see if this applies.
• Negative Equity: If your car is worth less than the settlement figure, you’ll need to cover the difference out of pocket.
• Transfer of Ownership: Make sure that the finance is cleared before transferring ownership to avoid legal complications.

Conclusion

Selling a car with outstanding finance is easily done but requires careful planning. Start by contacting your finance provider, understanding your settlement figure, and exploring the best option for your situation. By taking the right steps, you can clear your finance and sell your car smoothly and legally.

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