Selling a car with outstanding finance is easier than you think…

There’s no getting around the fact that new cars are expensive. Even used cars on the second hand market are commanding higher prices than they were, so it’s unsurprising that the vast majority of cars purchased in the UK are bought using some form of car finance package. In most cases, car buyers will wait for their finance deal to end before looking for another car, but sometimes a change in circumstances means you may need to sell a car with outstanding finance remaining. Thankfully it’s much easier than you think to do so and we’ve outlined the process below.

Whether or not you can sell a car with outstanding finance will depend on the kind of finance deal you’ve taken out on the car. The basic rule is that if you are the legal owner of the car under the terms of the finance deal, you can sell the car. If you are not the legal owner, you can’t sell the car. You can either arrange terms with the lender to pay-off the deal and sell the car or there may be a voluntary termination clause that will let you end the car finance agreement early.

The three main types of car finance available in the UK are Personal Contract Purchase (PCP), Hire Purchase (HP) and Personal Contract Hire (PCH), otherwise known as leasing. Let’s look at each type of car finance in turn and identify whether you can sell a car with that type of finance outstanding.

Can you sell a car with outstanding PCP finance?

Yes, you can sell a car with outstanding PCP finance. 

A PCP deal is structured into an initial deposit, followed by a series of monthly payments. At the end of the deal, buyers will either pay a lump sum (also known as a balloon payment) to take full ownership of the car, or simply hand it back to the dealership.

If you want to sell a car with outstanding PCP finance, there are a few things you’ll need to do first as the car technically belongs to the finance company:

1. Get in touch with your finance provider and let them know you want to sell your car or van. The finance provider is still the legal owner so you’ll need permission.
2. Ask your finance provider for a settlement figure. This will be made up of all the outstanding monthly payments and the balloon payment combined.
3. Pay off the settlement figure. Once the payment has been received by the finance company, you will receive confirmation either by post or email to state that there is no outstanding finance remaining on the vehicle and you are now the owner.

If you are part exchanging your current financed car against another car from a dealership, the dealership may be able to do some of the steps above for you, you may just need to provide them with the settlement figure from your finance company.

Can I sell a car with outstanding HP finance?

Yes, you can sell a car with outstanding Hire Purchase finance. 

Hire Purchase car finance deals involve a deposit followed by a series of monthly payments until the end of the deal. As with PCP deals, you can sell a car with outstanding HP finance by asking for a settlement figure and paying off the remaining balance. Ask your lender to calculate the settlement fee and once it’s paid, your car can be sold.

Can I sell a car with outstanding PCH finance?

No, you can not sell a car that is on a Personal Contract Hire agreement. 

PCH finance, otherwise known as leasing, is basically a long term car rental agreement. You rent the car for a period of time with a series of monthly payments and then you give it back. There’s no option to buy the car and you never own the car under PCH deals, so you can’t sell the car at any point in the deal.

Can I sell a car with a personal loan outstanding?

Yes, you can sell a car with a personal loan outstanding.

Unlike the other kinds of car finance covered above, a personal loan lets you sell the car before you’ve paid-off the finance agreement. That’s because you are the legal owner of the car as soon as you buy it with the money loaned to you by the lender and the loan isn’t secured against the car. Of course, you’ll still be liable to continue making the agreed loan repayments after the car is sold.

Selling a car with outstanding finance: things to consider

If you are planning on selling a car with outstanding finance, there are a few things you may want to consider beforehand:

• You are not the legal owner of the vehicle until the finance is fully paid off. You will need to obtain a settlement figure from your finance provider and make them aware you wish to sell the car. If you are selling through a dealer, they may be able to settle the remaining balance for you.
• It is illegal to sell a car with outstanding finance to a private buyer without making them aware.
• It is a good idea to get an idea of how much your car is worth by doing a valuation check.
• If your car is worth less than the outstanding finance balance, you will have to pay the difference.
• You cannot sell the car back to the finance company.
• You cannot sell a car if it is leased using Personal Contract Hire finance.

How to avoid buying a car with unpaid finance outstanding 

As we’ve explained above, cars with outstanding finance are technically owned by the finance company. While individual motorists can pay off the finance early to sell the car, they cannot sell the car with finance still outstanding. 

Unfortunately, some cars do make it onto the open market with finance still owing and any unsuspecting buyer paying for such a car could end up having the car repossessed when the real owner - the finance company - comes calling. It’s important, therefore, to always check that there is no finance outstanding on any car you’re buying in a private sale. Services like HPI Check or a car check website will let you do exactly that for a small fee. Our guide to avoiding buying a car with outstanding finance explains how to do this in detail… 

Auto Express has partnered with our parent company Carwow to bring you a fast and easy way to sell your car. Sell your car here...