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Can you sell a car on finance? Everything you need to know

September 07, 2022 by

Want to sell a car that you’re currently financing?  Our guide explains if this is possible.

Given the cost of cars, it’s unsurprising that the vast majority of new cars, and a significant proportion of second-hand vehicles, are obtained using some form of finance package.

But while finance deals like Personal Contract Purchase (PCP) are a convenient way of putting a new car on your driveway, one key aspect to these packages is that while you will be the registered keeper of the car, you will not technically own it – it remains the finance company’s for the duration of the contract.

The good news, though, is that if you have a financed car you want to sell, dealers are well set-up to settle the finance and get you into a new car. We’ll explain this ins and outs of this.

Can I sell a financed car?

Technically no, but in reality yes.

Here’s the deal: when a car is under a finance contract like a PCP agreement it is not yours – it belongs to the finance company, so you do not have the right to sell it.

BUT – and it’s a big, helpful but – major car dealers have the ability to easily settle the finance on a car that is still under contract, allowing you to get out of your current deal, and into a new car.

This involves you asking your current finance company for a settlement figure, which it has to provide within 12 days (though it tends to be faster than this).

The settlement figure will be valid for 10 days, so you’ll need to pay off that amount and sell your car within that time period (or get a new settlement figure after that point). The money from selling the car can be used to immediately settle the finance.

This may sound rather complicated, but the reality is that dealers are familiar with this process, and efficient at helping you get it completed.

If the car is worth less than the settlement figure, you will need to pay this money yourself in order to get out of the deal though.

Our guide to settling car finance early has more information.

You can also complete this process independent of a car dealer by speaking to your finance company directly and settling any outstanding monies owned on the car, but a car dealer will be able to do this much more smoothly.

Do note that if you have a car on finance and sell it in the conventional sense without settling the finance first (EG just take cash from a private buyer and hand them the keys and logbook), then you would be committing fraud.

There are four main car financing options, each of which we will cover in this guide.

Can I sell a car with outstanding PCP finance?

You will need to settle any outstanding finance before selling a car.

PCP finance requires that you pay an initial deposit and a series of monthly payments for an agreed period (usually between two to four years), with these sums paying off the car’s depreciation over the course of the contract. The car remains the property of the finance company throughout this deal. At the end of your finance term, you won’t own the car. You can choose to return it car to the dealer with nothing left to pay, take out a new finance agreement on a different car, or pay a lump sum to own the car outright.

This lump sum (sometimes called the optional final payment or ‘balloon’ payment) will be set out in your original finance agreement, and this (as well as all monthly repayments) would need to be paid in order for you to become the legal owner of the car, which would then grant you the right to sell it.

If you want to sell your car to a private buyer, contact your finance company to agree on a settlement figure. This will need to be paid before you sell the car. With PCP finance, the settlement amount includes any remaining finance payments, interest and the final ‘balloon payment’.

If you’d rather sell to a dealer, you must still agree on a settlement figure with your finance company. Dealerships can help arrange this – particularly if you are staying within the same brand of car.

Can I sell a car with outstanding HP finance?

Hire Purchase agreements see you rent the car for a period of time (EG three years), with your monthly repayments paying off the total cost of the vehicle.

As with PCP deals, the car remains property of the finance company throughout – although unlike a PCP deal, there is no final balloon payment – the monthly repayments (which tend to be higher than with a comparable PCP deal) pay off the car in totality, leaving you owning the vehicle at the end of the contract.

Until the end of the contract, though, the car is not yours to sell.

If you choose to sell it to a private buyer, you must agree on a settlement amount with your finance provider. This fee will cover the cost of all remaining monthly payments, plus interest.

As with PCP finance, you can choose to sell your car to a dealer instead, following a similar route to the one set out for PCP deals above.

Can I sell a car with outstanding PCH finance?

No. Personal contract hire (sometimes called leasing) is essentially a long-term rental agreement aimed at individuals. You agree on an initial deposit (up to one year’s worth of payments) and then make fixed monthly payments for the remainder of your finance term.

As with PCP finance, you may be charged additional fees at the end of your agreement if you return the car in poor condition or with higher mileage than set out in your agreement, while ending a PCH contract early can also be expensive.

If you are particularly taken with the car you have been leasing, you may be able to discuss buying it from the lease company at the end of the contract – but there is no obligation for them to do this.

Can I sell a car I’m paying off with a personal loan?

Yes. Using a personal loan to buy a car will see you own the car outright from the off, and the car will not be subject to outstanding finance. Obviously if you sell the vehicle the debt will still need paying off.

What if I can’t pay back my car finance early?

If your circumstances mean you are in a position where you need to end a finance contract on a car, yet the terms of the deal bring costs you are unable to meet should you wish to terminate the contract early, you should take financial advice. The Government’s Money Helper service or Citizen’s Advice are good places to start.

How much is my car worth?

Want to find out how much your car is worth once you’re in a position to sell? Check out carwow’s car car valuation tool to find out how much you could get for it.

Better still, why not sell your car with carwow? You can get offers from our network of trusted dealers quickly and easily, without having to deal with time-wasters or hagglers.

FAQ: Selling a financed car

Is it illegal to sell a car with outstanding finance?

Yes. You are not the legal owner of the vehicle until it is fully paid off. You are not legally allowed to sell it without settling any outstanding finance first. You can settle this amount by selling the car through a dealer, however.

How do I get a settlement figure for my car?

Contact your finance provider to get an up-to-date settlement figure for your car.

What happens if I sell a car with outstanding finance?

It is illegal to sell a car with outstanding finance to a private buyer without making them aware of this.

In order to legally sell your car, you must settle any outstanding finance first. If you are caught knowingly deceiving someone into buying a car with outstanding finance, you will be made to pay back what you owe to the finance company. You may also 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 your 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.

Does voluntary termination of car finance affect credit rating?

Voluntary termination will show on your credit record, but it will likely have a less detrimental impact than missing multiple finance payments. If you are experiencing financial difficulties, you should seek independent professional financial advice.

Can I sell my car back to the finance company?

No, as the car is not yours to sell.

Can I part exchange my car with outstanding finance?

No – the finance will need to be settled first – though a dealer may be able to help you with this.