Can You Sell a Car With Outstanding Finance?

When you finance a car, you are entering a contract with a lender to pay off the value of the car over time. But what if you wish to sell?


Can You Sell a Car With Outstanding Finance?


When you finance a car, you are entering a contract with a lender to pay off the value of the car over time. This means that the lender is the owner of the car, not you, so what if you wish to sell it? Whether that is because you no longer need the car or you’re looking to upgrade, you do have some options if you wish to end your car finance agreement early. 


If you wish to sell a car with outstanding finance you need to settle the remaining value of that agreement with the lender. Until that amount is paid, the lender legally owns the vehicle and therefore you are unable to sell the car. 


In this blog we’ll explore some of the common questions around if you can sell a car with outstanding finance and what alternative options are available to you. 


Is it illegal to sell a car with outstanding finance?


Yes, is it illegal to sell a car with an outstanding finance agreement in place. You must settle the outstanding cost of the car with the finance company. You can either settle this yourself, or through a dealer who may pay the outstanding cost. 


What happens if I sell a car with outstanding finance?


If you sell a car with outstanding finance you will be committing fraud and could be prosecuted. The finance company may take you to court to recoup any outstanding costs and the car may be repossessed from the new owner. 


How does selling a financed car work?


Unlike the normal process of selling your car, cars with outstanding finance cannot be sold legally. You must settle the outstanding amount on your finance agreement with your lender. 


To do this, you need to contact your finance company and work out a settlement figure. This will be a final payment needed to end the finance agreement. The way this amount is calculated can differ depending on if you have a hire purchase (HP) or personal contract purchase (PCP) agreement in place. 


Once you have paid the settlement figure, you are now the owner of the car and you are able to sell it.


Can I sell a car with outstanding hire purchase (HP) finance?


It is illegal to sell a car with an outstanding hire purchase finance agreement. A HP car finance agreement requires you to pay an upfront deposit followed by monthly payments for the remaining value of the car plus interest. Over the course of the finance deal you will be paying off the value of the car with a view to own the car outright at the end. So, can you sell a car with outstanding hire purchase finance? 


No, it is illegal to sell a car with an outstanding hire purchase finance agreement. In order to sell the car you must make a final settlement payment.


Can I sell a car with outstanding personal contract purchase (PCP) finance?


PCP car finance is when you are required to make an initial deposit and a series of monthly payments over a pre-agreed period to purchase. You don’t own the car outright but at the end of the contract period you can choose to either return the car, trade the car in for a new car finance deal or make a final balloon payment to pay the remaining value of the car.


Much like with a hire purchase car, in order to sell a car with an outstanding PCP car finance agreement, you must settle the outstanding balance, any interest and the final balloon payment before you can do so. 


Can you sell a financed car to a car dealer?


You can sell a financed car to a dealership but the outstanding balance with the finance company must be settled before you sell the car to the dealership. Some dealerships may offer to settle this for you, however, this will vary depending on the length of the contract remaining and final settlement payment.


What can you do instead of selling a car with outstanding finance?


Continue with you payments until your car finance agreement ends


Depending on how long is left on your car finance agreement, it may make more economical sense to continue with your monthly car finance repayments.


Once your finance agreement has come to a natural end, you will either own the car outright or have returned it so you’re no longer making payments to your car finance company.


Cancel your car finance contract


If you can no longer afford your car finance, you may be able to cancel your agreement through a ‘voluntary cancellation’ clause in your contract. The terms under this clause can vary depending on your circumstances, but usually you don’t have to pay any interest but will have to pay a cancellation fee.


Return the car to your car finance lender


Another option you can take is to return the car to your lender. The criteria for returning the car will vary in your contract, so it’s worth discussing this option with your car finance lender to see if this is a viable option.


Can selling a car with outstanding finance affect my credit score?


Selling a car with outstanding finance can have an impact but will not be as negatively impactful as missing multiple payments on your car finance agreement.


It’s worth noting that voluntary termination is designed for customers who cannot afford their monthly repayments, not for those that are just looking to switch cars.

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