Selling a Financed Car

Can I sell a financed car?

Selling a financed car isn’t quite as straightforward as it might be when you’ve bought a car outright in cash, but it’s not impossible! The important thing to remember is that you don’t own the car - and won’t be free to sell it - until you’ve paid off the total finance.

With a hire purchase loan, you’ll become the car’s owner once you’ve reached the end of your agreement and paid the ‘Option to Purchase’ fee. But with PCP car finance, you have more options. When your loan term ends, you can choose to hand the car back, use any positive equity as a deposit in a new deal, or buy it by choosing to pay the final ‘balloon payment’.

Don’t worry, you’re not necessarily stuck until the end of your loan term! If you don’t want to wait until the end of your finance agreement there are ways of selling a car with finance.

The process starts when you request a settlement figure from the finance company. This amount will be the total remaining finance (including interest) minus the deposit and any repayments you’ve already made.

When you choose to sell at a car dealership, they may offer to pay your settlement figure for you as part of the deal.

Can I sell a car with outstanding finance?

You can only sell a car with outstanding finance if you settle that finance first and become its legal owner. In fact, it’s illegal to sell a car on finance without making the buyer aware of the vehicle’s status. Failing to pay off your finance or disclose this to the person buying your car might even land you in court! Don’t forget that the lender will be the legal owner of your car until the finance is settled.

What is a settlement figure?

When it comes to car finance, a settlement figure is the amount of money you still owe on your agreement, including interest. It’s determined by adding up your remaining monthly payments and taking away any future interest that you won’t need to pay.

Once you’ve requested a settlement figure from your lender, you’ll receive a copy in writing. That figure will usually remain valid for 28 days.

Can I sell a car on PCP finance?

With PCP finance, you won’t be the legal owner of the car until you’ve reached the end of your agreement and paid the final ‘balloon payment’. If you want to sell the car early, you must pay the settlement figure first.

In this case, the PCP car finance settlement figure will include any remaining finance payments, interest, and the final balloon payment amount.

Can I sell a car on HP finance?

HP finance is different to PCP as you can’t simply choose to hand the car back when you reach the end of your loan term. This can mean that your monthly repayments are higher as you’re working towards car ownership but, technically, the lender will be the legal owner of the vehicle until your agreement ends.

To sell a car with HP finance, you need to pay the settlement figure first. This will be calculated by adding up your remaining monthly instalments and taking away any future interest that you won’t need to pay. Typically, the further you are into your agreement, the lower your settlement figure will be. But make sure you check the small print in case you need to pay an early settlement fee.

Can I sell a car with a personal loan?

A personal loan can offer more flexibility than other types of car finance. That’s because, unlike HP and PCP, with a personal loan, you legally own the car as soon as you’ve paid the dealership. You’re then free to do whatever you like with it (within reason) if you keep up with your repayments – including sell it!

It’s totally up to you whether you choose to sell the car privately or to a dealership but, even if you no longer own the car, you’ll still have to make payments on the loan until you’ve paid off the full amount (including any interest)

How to sell a car on finance

So, you’ve decided to take the plunge and sell your financed car – what happens next?

• The first step is to contact your finance provider to get an up-to-date settlement figure – this is usually valid for 28 days
• Check whether any early settlement fees apply
• Pay off your finance and have the car transferred into your name
• You’re now free to sell the car privately or to a dealer

Don’t forget; it’s illegal to sell a car with outstanding finance. You must follow these steps and settle your agreement before selling your car.

I bought a car with outstanding finance, what are my rights?

There’s no feeling quite like buying a new car. The excitement, the pride, the new features to explore – it’s the best part of the process! But what if you’ve unknowingly bought a car that has outstanding finance?

The good news is that, if you bought the car in good faith and weren’t told that it had finance outstanding, then you have the right to keep it. Be prepared for the finance company to launch an investigation to double-check that you really are the innocent party. They’ll then decide who is responsible for paying off the finance. Usually, that’ll be the person who signed the original agreement, but they might conclude that you’re liable instead.

In that case, it’s best to seek independent legal advice or contact the Financial Ombudsman.

Can I save money by paying off my car finance early?

The short answer is yes. Paying off your car finance early could help you save money overall. It all depends on the terms of your agreement but, in general, the faster you’re able to pay off your loan, the less interest you’ll pay overall.

Every deal is different though so be sure to double-check the small print. Some lenders will ask you to pay an early settlement fee to offset some of the interest they’ll lose by ending your agreement early.

Can I sell my car to pay off the finance?

If you have a PCP or HP finance agreement, you can’t sell your car until you’ve become its legal owner. That means that you’ll need to find an alternative way to pay off the finance before selling the car.

You might be able to secure an auto financial service like refinancing to split the settlement figure over a shorter loan term so you can still pay it off faster. A refinance loan is a new financial agreement – usually with a new lender – that you can use to pay the balance on an existing loan. You’ll settle your current finance with a one-off payment and depending on the deal, that payment will be covered by the new lender or incorporated into your new loan amount.

What can I do if I can’t afford my car finance?

A car finance loan is a big commitment, some deals can last up to six years after all! And a lot can change over that time. You might have expanded your family, lost your job, or be facing increased living costs that make it harder for you to keep up with your car finance payments.

In this case, you might be eligible for voluntary termination. Under Section 99 of the Consumer Credit Act 1974, you have the right to voluntarily terminate your PCP or HP finance agreement and return the car to the lender if you’ve already repaid 50% of the total amount payable.

This law is in place to protect car finance customers who can no longer afford their monthly repayments. It also provides some protection to lenders and prevents people from walking away from their obligations.

You’ll find more details on your right to voluntary termination in your finance agreement.

How does voluntary termination work?

If voluntary termination sounds like the right option for you, you’ll need to repay 50% of the total amount payable on your loan, including any interest and fees. This shouldn’t be confused with the total amount borrowed (the value of your car) or half of your scheduled monthly repayments.

With HP, you’ll usually hit the 50% point about halfway through your agreement but with PCP, this point could come later in your loan term. That’s because you may also have to pay 50% of the guaranteed future value of your car (known as the ‘balloon payment’).

Start by contacting your lender to let them know that you’d like to opt for voluntary termination. They might ask you to confirm this with a written letter or email. If you’ve already met the 50% threshold, you can then return the car.

Does voluntary termination affect your credit score?

No, voluntary termination is your legal right and it shouldn’t affect your credit score. A record might be left on your credit report but the reason for termination won’t be shown. It’s worth bearing in mind though that, while terminating doesn’t directly affect your credit, it might still make it more difficult to get approved for car finance in the future.

Whether you’re looking for car financing with 500 credit score or 200, we could help! At CarFinance 247, we work with a panel of lenders, which means we can look to find loans for people with a variety of credit circumstances including those searching for bad credit car finance. And no matter your score, we’ll always look to find you the best deal from our panel of lenders.

Can I swap to a cheaper car finance deal? 

If you’d like to keep your car but reduce your monthly repayments, a refinance loan could work for you. This type of car finance allows you to take out a new finance agreement to pay the balance on an existing loan.

There are a few different reasons why you might want to consider a refinancing loan:

• You could find a loan with lower repayments. If you’re looking to save money on your car finance, you could swap to a loan with cheaper monthly repayments and a longer repayment period
  
  
• If your credit score has improved over time, you could find a loan with a lower rate of interest, lowering your monthly repayments or reducing the total amount payable
  
  
• When you’re coming to the end of a PCP agreement, you can take out a refinance loan to split the cost of the final balloon payment into manageable monthly repayments

Make sure you keep in mind that switching to lower repayments might not be the best value long-term. Take note of the total amount payable on the loan. Choosing lower monthly repayments but a longer loan term with interest could mean you’ll back more overall.

I’ve settled my finance and I’m ready to sell my car; can I get a new loan?  

Yes! Whether you’ve chosen to sell your car privately or would like to part-exchange it as a deposit in a new deal, we can help you find finance and secure your dream car! Think of our car search as your own car finance showroom; it’s home to more than 100,000 used cars from trusted dealerships based all over the UK.

Your dedicated account manager will be on hand to help you explore all the options, process the paperwork, and find the best deal from our panel of lenders – they can even negotiate with the dealer on your behalf. We can move as quickly as you like; you’ll get a decision in minutes and might be able to get a same day car loan. Apply online to get a no-obligation quote.