Can You Sell a Car on Finance? A Complete Guide

Purchasing a car is an important decision that most people have to make at some point in their life. With the rising costs of new cars, many individuals are turning to finance options when it comes to buying a vehicle.

However, what happens if you want to sell your car before you have fully paid off the finance? Can you sell a car on finance? This guide will discuss everything you need to know about selling a car on finance.

Understanding Car Finance

Before we get into the details of selling a car on finance, let’s first understand what car finance actually is. Car finance refers to any method of obtaining funds to purchase a vehicle. This can include bank loans, dealership financing, or leasing agreements. Car finance allows individuals to spread out the cost of a car over time rather than having to pay for it all upfront.

Types of Car Finance

Various types of car finance options are available, each with its terms and conditions. The most common types include:

  • Personal Contract Purchase (PCP): This type of financing involves paying a deposit and then making monthly payments for a set period of time. At the end of the term, the individual has the option to either pay a lump sum to own the car or return it to the dealership.
  • Hire Purchase (HP): With this type of financing, an individual pays off their car in monthly installments over a fixed period. Once all payments are complete, they own the car outright.
  • Personal Loan: This option involves taking out a loan from a bank or other financial institution to purchase the car. The individual will then make monthly payments until the loan is paid off. The car is owned outright from the start.

Who Owns a Car Bought on Finance?

When a car is purchased through finance, the individual does not technically own the vehicle until all payments are complete. This means that the lender or finance company has legal ownership of the car until it is fully paid off.

Different financing options have varying terms and conditions when it comes to ownership, so it’s important to carefully read the contract before signing. For example, with HP agreements, the individual only becomes the legal owner once all payments are complete. However, with PCP agreements, they have the option to become the owner at the end of the term.

What Does Voluntary Termination Mean?

Voluntary termination is a legal right that allows individuals to end their car finance agreement early. This can be used when at least half of the total amount owed has been paid, including any interest and fees.

This means that if an individual has paid off more than half the total amount owed on their car, they can return it to the finance company without further payments. This can be a helpful option for those who can no longer afford to make payments or want to end their agreement early.

Can You Sell a Car on Finance?

Technically, until you finish paying off your car finance, the lender is still considered the legal owner of the vehicle. So, can you sell car with finance? The short answer is yes, but there are a few things you need to consider before doing so.

Getting a settlement figure

If you want to sell your car on finance, the first thing you need to do is get a settlement figure from your lender. This figure will tell you how much you still owe on your car and how much it would cost to pay off the finance in full. Once you have this figure, you can then determine how much money you will have left over after settling the finances.

Paying off the finance

To sell your car on finance, you will need to pay off the remaining balance in full.  If the amount of money you can get for the sale of the car is less than your settlement figure, you will need to cover the difference out of pocket. Alternatively, if you can sell your car for more than the settlement figure, you will make a profit.

Transferring ownership

Once you have paid off your finance, you will receive a document from your lender stating that they no longer have any interest in the vehicle. You can then use this document to transfer ownership of the car to the new buyer.

Other Considerations

Before selling your car on finance, there are a few other things you should keep in mind:

  • Early settlement fees: Some finance agreements may have early settlement fees if you decide to pay off your loan before the agreed-upon term. Be sure to check your contract for any additional fees.
  • Negative equity: If the value of your car is less than what you owe on your finance, this is known as negative equity. In this case, you will need to pay off the difference before selling the car.
  • Transfer fees: When transferring ownership of a financed vehicle, there may be additional transfer or administrative fees involved. Make sure to factor these into your calculations.

Can you Sell a Car With Outstanding PCP Finance?

A PCP agreement can be a bit trickier when it comes to selling the car. In most cases, you will not own the vehicle until you make the final lump sum payment at the end of the term. This ‘balloon’ payment can make it difficult to sell the car before the agreement has ended.

However, it is still possible to sell a car with outstanding PCP finance.

Settling the agreement early

The first option would be to settle your PCP agreement early by paying off the remaining balance and taking ownership of the vehicle. You can then sell the car as you please. However, this may not always be financially feasible.

Voluntary Termination

Another option is to exercise your right to voluntary termination. This means you can return the car to the dealership and walk away from the agreement if you have already paid at least half of the total amount due. Keep in mind that there may be additional mileage or condition restrictions with this option.

Can You Sell a Car With Outstanding HP Finance?

Hire Purchase agreements mean you are technically renting the car until you make the final payment and take ownership. Therefore, it is possible to sell a car with outstanding HP finance, but there are a few important things to note.

Seeking permission from the lender

Before selling a vehicle under an HP agreement, you will need to seek permission from your lender. This may involve paying off any remaining balance or transferring the loan to the new buyer.

Transferring ownership

As with any financed vehicle, once all payments are complete, you will need to transfer ownership to the new buyer through a change of registration document. This is typically done by filling out and submitting a V5C form.

Can You Sell a Car With Outstanding PCH Finance?

No. Because Personal Contract Hire (PCH) agreements are essentially long-term car rentals, you will not be able to sell the vehicle. The car belongs to the leasing company, and at the end of the term, it must be returned to them.

You can potentially buy the car from the leasing company and then sell it, but this will likely come at a significant cost. Therefore, if you are considering selling your car before the end of a PCH agreement, it may be more beneficial to explore other options, such as early termination or transferring the lease to someone else.

Can I Sell a Car I’m Paying Off With a Personal Loan?

Yes. As you’re using personal loan funds to purchase the car, you are considered the legal owner from the start. Therefore, you can sell the car anytime without restrictions or additional fees.

However, unless you plan to put the proceeds of the sale towards paying off the personal loan, you will still be liable for making your monthly payments as originally agreed upon. It is always best to check with your lender beforehand to ensure there are no early repayment fees or penalties.

What Are The Steps to Selling a Car on Finance?

Now that you’ve gotten a better idea of the specific considerations for selling a car with different types of finance agreements, here are some general steps you should follow when selling any car on finance:

Get a settlement figure from your lender

Your first step should always be to get a settlement figure from your lender. This will give you an accurate idea of how much you owe on the car and what it will take to pay off the finances. Finance companies are obliged to provide this information to you within 12 days of your request.

Determine the value of your car

Next, you’ll want to determine the current market value of your car. You can do this by researching similar models and their prices or by getting a valuation from a trusted source such as a dealership or online valuation tool. The equity in the car (the amount by which the value exceeds the settlement figure) will determine whether you make a profit or suffer a loss.

Calculate any potential profit or loss

Using the settlement figure and estimated market value, you can calculate your potential profit or loss. If the car is worth more than you owe, you will have positive equity and may profit from the sale. If the value is less than what you owe, you will have negative equity and may need to pay off the difference before selling.

Prepare your car for sale

Like selling any other car, you will want to ensure your vehicle looks its best before putting it on the market. This may involve cleaning it well and addressing any minor repairs or maintenance needs. Minor upgrades such as new tires or a fresh coat of paint can also increase the value of your car.

Advertise and sell your car

Once you have all the necessary information, it’s time to advertise and sell your car. You can do this through online marketplaces, social media, or by using traditional methods such as newspaper listings. Be sure to disclose any outstanding finance on the vehicle in your listing and have all relevant paperwork ready for potential buyers.

Get an offer and complete the sale

Once you have found a potential buyer, they will likely request an inspection or test drive of the car. If everything checks out and the buyer is still interested, they will make an offer. From there, you can negotiate and find a suitable payment method that works for both parties. Once all payments are made, complete any necessary paperwork to transfer ownership to the new buyer. 

Settle the outstanding finance

One of the final steps in selling a car on finance is to settle any outstanding finances with your lender. This may involve paying off the remaining balance or transferring the loan to the new buyer. Once this is complete, you will no longer be responsible for the vehicle and can move on to your next car without any financial obligations holding you back.

Receive the surplus funds (if any)

If you have positive equity in your car, meaning the sale price exceeds the settlement figure, you may receive surplus funds from the sale. These additional funds can be used towards a down payment on your next vehicle or for other financial needs.

Feedback to your lender

Finally, it’s a good idea to provide feedback to your lender regarding your experience selling a car with outstanding finance. This can help them improve their processes and services for future customers in similar situations. It also shows that you are responsible and transparent in managing your finances. 

Conclusion: Getting the Most Out of Selling a Car on Finance

Selling a car on finance may seem daunting, but with proper research and planning, it can be a smooth process. Whether you’re looking to upgrade your vehicle or simply need to get out of your current agreement, following these steps and understanding the specific considerations for each type of finance agreement will help you get the most out of your sale. Remember to always communicate with your lender and potential buyers, and consider seeking professional advice if needed.  So go ahead and confidently sell your car on finance!  Good luck!  Happy selling!

Selling a Car on Finance FAQ

To make things easier, here are some frequently asked questions about selling a car on finance:

Is it possible to sell a car on finance?

Yes, selling a car with outstanding finance is possible as long as you follow the necessary steps and have all the relevant information. It’s vital to remember that you are not the legal owner of the car until you have paid off the finance in total, so there are specific considerations to keep in mind.

What do I need to know before selling a car on HP or PCP?

If you’re selling a car with Hire Purchase (HP) or Personal Contract Purchase (PCP), you will need to obtain a settlement figure from your lender and determine the current market value of your car. You will also need to consider the equity in the vehicle and any potential profit or loss from the sale.

Can I sell a car on finance if it has negative equity?

Yes, you can still sell a car with negative equity, but you will need to settle the outstanding balance with your lender before transferring ownership to the new buyer. In some cases, the lender may allow for a transfer of the finance agreement to the new owner, but this will need to be discussed and agreed upon beforehand.

Can I sell a car on finance if it has positive equity?

Yes, you can sell a car with positive equity, meaning you have paid off more than what is owed on the vehicle. In this case, you may receive surplus funds from the sale that can be used towards a down payment on your next car or other financial needs.

What happens to the outstanding finance when I sell my car?

The outstanding finance on your car will need to be settled before transferring ownership to the new buyer. This may involve paying off the remaining balance or transferring the loan to the new owner, depending on the agreement with your lender.

Should I inform potential buyers about the outstanding finance on my car?

Yes, it is essential to disclose any outstanding finance on your vehicle to potential buyers. This will help avoid any legal issues and ensure a smooth transaction for both parties involved.

 

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