Can you sell a car on finance?

Thinking of selling your car but still paying it off? This handy guide explains how selling a car on finance works and what to do if there’s outstanding finance.

Can you sell a car on finance? It’s a common question for those looking to change cars before their agreement ends. Whether you’re selling a car on finance or need to sell a car with outstanding finance, this guide will walk you through your options and the steps involved.

Can you sell a car on finance?

Technically no, but in reality yes.

When you buy a car with finance, such as a PCP or HP agreement, the car legally belongs to the finance company until the agreement is settled. That means you can’t sell it until you pay off the outstanding finance, plus any admin fees.

In most finance deals, you’ll be in negative equity early on: when your car’s value is less than the settlement figure. This is due to rapid depreciation in the first half of the contract. Later, as payments catch up and depreciation slows, you may reach positive equity, meaning the car is worth more than what you owe.

To reduce negative equity, consider:

• Avoiding excess mileage and damage
• Making overpayments or higher monthly payments (if allowed)
• Paying a larger deposit upfront

If you want to sell, ask for a settlement figure from your finance provider, which is valid for 10 days. You’ll need to pay this off before the sale, either using the buyer’s payment or covering any shortfall yourself.
Bear in mind that selling a financed car without settling the agreement is fraud.

There are four main types of car finance:

• Personal Contract Purchase (PCP)
• Hire Purchase (HP)
• Personal Contract Hire (PCH)
• Personal Loan

Each has its own process for selling or settling early, which we will explore in this guide.

Remember, you can buy a brand new or used car right here on Carwow. And you can also sell your car, too. We’re here to help you through every step of your car-changing journey.

Selling a car with outstanding PCP finance

Personal Contract Purchase (PCP) is a popular car finance option where you pay a deposit and fixed monthly payments over 2-4 years, covering the car’s depreciation. At the end, you can either:

• Return the car (if within agreed mileage and condition)
• Part-exchange it for a new PCP deal
• Pay a final balloon payment to own it

Until that final payment is made, the car belongs to the finance company, so you can’t legally sell it until the outstanding finance is fully settled.

Dealers can often handle this process if you’re trading in. Or, you can contact your finance provider, request a settlement figure, and pay it off yourself.

You may also voluntarily terminate the agreement if you’ve repaid at least 50% of the total finance (including the balloon payment), provided the car is in good condition.

Private sale is possible, but only once the finance has been cleared. The settlement figure typically includes remaining payments, interest, admin fees, and the balloon payment.

Selling a car with outstanding HP finance

Hire Purchase (HP) agreements allow you to pay for a car over an agreed period (commonly around three years) through fixed monthly payments that cover the full cost of the vehicle.

Unlike PCP finance, HP does not have a final balloon payment. Monthly payments are typically higher but once all payments are made, you own the car outright.

Until the contract ends, the car legally belongs to the finance company, so you cannot sell it without first settling the outstanding finance.

To sell the car privately before the contract ends, you must ask for a settlement figure from your finance provider, which includes all remaining payments, interest, and any fees.

Alternatively, if selling to a dealer, they can often arrange the settlement on your behalf, particularly when part-exchanging for another vehicle.

Selling a car with outstanding PCH finance

Personal Contract Hire (PCH) deals are essentially long-term rental agreements aimed at individuals. You pay an initial deposit (often called an initial rental) followed by fixed monthly payments over the term of the lease, typically 2-4 years.

Unlike PCP or HP finance, you never own the car – it remains the property of the leasing company throughout.

At the end of the contract, you may be charged extra for any damage beyond fair wear and tear or if you exceed the agreed mileage limit. Ending a PCH contract early can also be costly.

While some lease companies may offer the option to buy the car at the end of the lease, there is no obligation for them to sell it to you.

Selling a car with an outstanding personal loan

If you buy a car using a personal loan, the car is yours from the start. You’ll need to repay the loan to your bank or lender as agreed, but you’re free to sell the car whenever you like and use the money to pay off the loan.

As long as you keep up with your loan payments, you can do what you want with the car.

Just keep in mind that new cars lose value quickly, especially in the first three years. This means the car might be worth less than what you still owe on the loan during that time.

How to sell a car you are financing

If you decide that you definitely want to settle your financed car, here are the steps that you need to take:

1) Request a settlement letter

Contact your finance company and let them know you want to sell your car. Ask for a settlement letter showing how much you need to pay to clear the finance. Check if there are any early settlement fees in your contract.

2) Get your car valued

Find out how much your car is worth. Use a free online valuation tool such as Carwow’s to get an accurate market price. This helps ensure your sale will cover the outstanding finance.

3) Prepare your car for sale

Gather all important documents: V5C logbook, full service history, and MOT certificate. Clean your car thoroughly, fix any minor damage, and make sure you have a spare key. All these tips will help increase your car’s value.

4) Receive and set your offer

If using Carwow, submit your car details and photos. The team will help you set a reserve price (the minimum you’re happy to accept) that should cover the outstanding finance amount. Your car will then be auctioned to thousands of dealers.

5) Confirm the sale

Once you accept an offer, the dealer will arrange a free collection of your car. You’ll need to give them all paperwork, keys, and any locking wheel nuts. Payment usually arrives on the same day as collection.

6) Settle the outstanding finance

Your dealer may handle paying off your finance company directly. If not, you’ll need to pay the settlement amount yourself, usually via phone or online banking. Confirm the exact process with both parties.

7) Complete the sale

After your finance is fully settled, you legally own the car and can complete the sale with the buyer by signing any necessary paperwork.

8) Receive any surplus funds

If you sold your car for more than the outstanding finance, you’ll get the remaining balance after the loan is paid off.

9) Talk to your lender if you’re struggling

If you’re selling because you’re struggling with repayments, speak to your finance company. They may offer payment plans or other support options.

Selling a car on finance FAQs

Is it illegal to sell a car with outstanding finance?

If your car is still financed, the finance company owns it until the loan is fully paid. You can’t legally sell it without clearing the finance first. Selling without telling the buyer is fraud. However, dealers often handle paying off the finance for you during the sale, allowing ownership to transfer legally.

How do I get a settlement figure for my car?

You will need to contact your finance provider to get an up-to-date settlement figure.

What happens if I sell a car with outstanding finance?

It’s illegal to sell a car with outstanding finance to a private buyer without making them aware of the car’s status.

To legally sell your car, you must first settle any outstanding finance. If you are caught knowingly defrauding someone into buying a car with outstanding finance, you could face legal action.

If your car is financed using Personal Contract Hire (PCH) finance, you cannot sell it at any point.

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

There are many online services that allow you to check whether a car has any outstanding finance before you buy it. They aren’t free, but they often include additional information, such as whether a car has been previously written off.

If you unknowingly buy a car that has outstanding finance payments, you may have the right to keep it, providing you can prove you bought it in good faith. The finance company will attempt to check you are an innocent party first, but they will ultimately decide who must pay the outstanding finance.

Typically this will be the person who signed the original finance agreement but they may decide you are liable for this amount instead. You may want to seek legal advice in this situation or contact the Financial Ombudsman Service.

Does voluntary termination of car finance affect credit rating?

Voluntary termination will show on your credit record, but it will probably have less of an impact than missing multiple finance payments. If you’re facing financial difficulties, you should seek independent professional financial advice.

Can I sell my car back to the finance company?

The car is not yours to sell, so no.

Can I part exchange my car with outstanding finance?

Again, the finance will need to be settled first if you want to part exchange your car with outstanding finance, but a dealer might be able to help you with this.