Can I sell a car with outstanding finance?
Written by:
Verity Hogan
Content Manager
If you’re midway through your car finance agreement but want to end it early, you do have options. However, your ability to sell a car with outstanding finance will usually depend on the type of loan you have and your individual circumstances.
With a hire purchase (HP) or personal contract purchase (PCP), you can’t sell a car with outstanding finance. That’s because both types of finance are secured to the vehicle, meaning the lender will be its legal owner until the loan term ends (and you’ve paid the balloon payment in a PCP deal).
But that doesn’t mean you’ll be stuck with a car you don’t want or can’t afford to keep! There are ways that you can end your loan agreement early and sell your car – but you’ll need to settle your finance first.
To start the process, you can contact the lender and request your settlement figure. This is the amount you’ll need to pay to end your loan and become the car’s legal owner. There may also be an early repayment charge added, so double-check your agreement to know where you stand.
Once you pay the settlement figure, the car will officially be all yours, and you’ll be free to sell it or part exchange it.
Can I sell a car with outstanding hire purchase (HP) finance?
With a hire purchase (HP) finance deal, you won’t legally own the car until you’ve made all the loan repayments and paid the Option to Purchase admin fee.
During the loan term, you’ll be the car’s registered keeper and responsible for its running costs, but you can’t sell, modify, or part exchange it.
To end your loan early so you can sell the car, you’ll need to pay the settlement figure first. This will typically be the amount still owed on the loan minus any future interest. You can pay in full with your savings or take out another form of finance like a personal loan to cover the cost.
Can I sell a car with outstanding personal contract purchase (PCP) finance?
In a personal contract purchase (PCP) finance agreement, you won’t be the car’s legal owner during the agreement. In fact, you might not ever be its legal owner if you choose to return the vehicle when the loan term ends.
If you do want to become the car’s legal owner during your PCP loan, you’ll need to pay the settlement figure. This will likely include the outstanding finance owed plus the balloon payment.
Can I sell a car I’m paying off with a personal loan?
Yes, a personal loan works differently from other types of car finance as it isn’t normally secured against your vehicle. That means you’ll become the car’s legal owner as soon as you pay the seller and transfer the paperwork.
If you make all your loan payments on time, you can do whatever you want with the car, including selling it.
Can I part exchange a car with outstanding finance?
Yes, it may be possible to part exchange a car with outstanding finance. No matter whether you’re hoping to sell your car privately or trade it in at a dealership, the loan must be settled first.
Some dealers may be willing to handle the settlement process for you when you’re buying your next car, but it will often depend on whether you’re in positive or negative equity.
If you’re in positive equity, your car will be worth more than the settlement figure. The dealer might offer to pay off the outstanding finance and put any remaining equity towards your part exchange.
In contrast, if you’re in negative equity, your car will be worth less than the settlement figure, and the dealer might not agree to a part exchange unless you can afford to pay the difference.
Is it illegal to sell a car with outstanding finance?
Yes, you can’t legally sell a car that’s owned by someone else. During your HP or PCP loan, you’ll be the car’s registered keeper, but the lender will remain its legal owner. This offers some protection for them if you were to fall behind with your repayments.
What happens if I sell a car with outstanding finance?
It’s against the law to knowingly sell a car with outstanding finance, especially if you don’t inform the buyer. You must settle the finance and become the car’s legal owner first.
If you’re found to have sold a car that’s not legally yours, you could face legal action. The lender may also require that you pay back what you owe.
What are my rights if I’ve bought a car with outstanding finance?
As a used car buyer, there are steps you can take to protect yourself from buying a car with outstanding finance. This might be especially important if you’re buying from a private seller, who often can’t offer the same assurances as an approved dealership.
Several online services let you check whether a car is financed before you take the plunge and hand over your cash. Unfortunately, there’s usually a fee attached, but it might be worth it for the added peace of mind. Depending on the site you use, it could also tell you whether the car’s ever been written off before.
If you do unknowingly buy a car with finance owing, you might be allowed to keep it if you bought it in good faith. Typically, the lender will investigate to decide who should pay the outstanding amount. Even so, there’s a chance that they could decide you’re liable, and if you do find yourself in that situation, consider seeking legal advice.