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Can I Sell a Car on Finance? – 2022 Complete Guide

Selling A Car On Finance

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

Can I sell my car with outstanding finance on it? 

If you’ve been asking yourself this question lately, this guide is for you. We discuss the complete process and your options for selling a car with outstanding finance. 

Read on to uncover all the details about selling a car with finance on it – and related details! If you’re looking to get out of your car finance agreement, find out how here.

Don’t worry, here’s what to do!

There are several debt solutions in the UK that can be used to improve your finances. Choosing the right way to tackle your debt could save you time and money, but the wrong one could cause even more harm

It’s always best to find out about all your options from a professional before you take action.

Fill out the 5 step form to get started. 

What is a Hire Purchase Agreement?

A Hire Purchase Agreement is a type of finance agreement used to buy a car over many months or years, also known as a personal contract purchase (PCP). The buyer of the vehicle will put down a lump sum and then pays the dealer the rest of the car’s value in ongoing instalments. Paying over time is not free and dealers will add interest. 

Once the car is paid off, the finance agreement ends and the buyer owns the car outright. These arrangements are authorised and regulated by the Financial Conduct Authority. 

Can I sell a car with outstanding finance?

Until the purchase agreement has been paid off in full, the dealer is the legal owner of the car. That means buyers cannot sell before the purchase agreement is finalised with the lender. 

However, there may be other options that will allow you to sell. We discuss these later in our post. 

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Is it illegal to sell a car under finance?

Selling your car under finance is illegal and may result in legal action being taken against you by the dealer or finance company. If you are trying to sell your car under finance to get out of debt or avoid paying it off, you could make your financial situation worse.

There are more suitable options!

What happens if you sell a car with finance on it?

If you do sell your car with finance on it, there is a good chance you will get caught out and pay the price. The finance company or dealership can take legal action against you and you may be hit with a financial penalty.

Moreover, the lender will be able to repossess the vehicle as it is technically still their car. This will mean the person who bought the car from you might also take legal action against you to get their money back if you do not willfully do so. 

A claims process like this can be stressful and cost you even more. 

Can you go to jail for selling a car on finance?

In most cases, you cannot go to jail for selling a car on finance. If you sell it illegally it is still a civil matter. However, if you sold the vehicle to defraud an insurance company, you may be subject to a custodial sentence for fraud. Most people do not sell cars on finance for this reason and will not be sent to prison even if they are caught. 

Buying a second-hand car HPI check

If you are considering buying a second-hand vehicle, it is worth conducting an HPI check on the vehicle as part of the process.

This will tell you if the vehicle has outstanding finance on it, and if so, you should avoid the seller. If you did buy one of these cars, it may be taken off you, leaving you out of pocket unless you pursue the seller with legal action. 

Do not just ask to pay a lower price if it’s still on finance – avoid it completely! 

How to sell a car on finance legally

You may not be able to sell your car with outstanding finance instantly, but there are still ways to sell it legally. 

To sell your car with outstanding finance legally, you must first end your hire purchase agreement early. First, you will need to check the finance agreement to make sure it is possible to settle the finance. It probably is. 

Then you should call the car finance company or dealership and ask for a settlement figure based on the car’s value. There may be an early settlement fee added to the final figure. If you can afford the early settlement amount, you will be given so many days to make the payment.

Once the payment is made, the vehicle is legally yours and you can do with it as you please – including selling it to another person or complete a part exchange to trade it in for a new car. 

If your settlement figure was higher than what the car is worth due to fees and interest, selling your car could leave you with negative equity. 

Do the maths first!

An alternative option – returning the car

If you were trying to sell the vehicle with outstanding finance because you could no longer afford the repayments and it might put you into debt, there may be an alternative solution. 

If you cannot afford the settlement figure, you can look into the possibility of returning the car to the lender, known as a voluntary termination. You may not have the car any longer, but it will prevent any debts from materialising. 

Generally speaking, buyers can return the vehicle if they have not yet paid back 50% of the value of the payments (all fees included). But be aware, you may be required to pay any remaining amount of the finance arrangement up to 50%.

We have a termination request letter template you can use for free!

If you have already repaid more than 50% of the personal contract purchase’s value, this may not be an option. 

It will still be an option if the contract includes a voluntary termination clause. This is a clause added to let people return the car if they have already paid over 50% of the finance agreement’s value. Interest is not normally added either, but it can be. 

Consider debt solutions instead

The car may not need to be sold to avoid debts if you offer any other lender a repayment plan. Alternatively, you could use one of the many debt solutions. Discover information about these debt solutions online for free by checking out this helpful solutions guide!

Will this affect my credit rating?

The Consumer Credit Act 1974 allows you to settle and terminate the HPA. The fact that you terminated the agreement can appear on your credit report, but it is unlikely to have a negative effect. 

This is not the same as defaulting on payments that you still need to pay. 

Can I sell the car while repaying a loan?

If you took out an unsecured personal loan to buy a car and have used the credit to purchase the vehicle outright, the car is yours to sell. You could then use the money to repay some of the loan payments – but it may not cover the full loan amount. 

You may be able to get a loan settlement figure from the lender. Contact them directly to find out if you can settle.  

Are you struggling with debt?

Affordable repayments

Reduce pressure from people you owe

Stop interest and charges from soaring

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Would you like help with car finance agreements?

If you need further support, the first step is to go online and search for debt charities or search the Citizens Advice website. There you will find contact information to get in touch with knowledgeable people who can give you personalised advice. 

Fight back against the car dealers by knowing your rights!

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