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Last updated: 05/06/2024 | Estimated Reading Time: 4 minutes

Can I sell a car with outstanding finance?

There are a number of reasons why you might want to get rid of your car at any time. But when you’ve got an outstanding finance arrangement, things can get a little bit complicated.

Although your name is on the documents of your car finance deal, the car is still owned by your lender until the contract is over. This is what can make selling it on a little tricky, but there are ways around this.

In This Guide:

Can you sell a car on finance?

Whatever your reasons for wanting to sell, you may find it difficult to find a dealer who will buy a car with outstanding finance on it. This is because, until the finance deal is over, you do not actually own the vehicle.

Your chances of selling or trading a car on finance ultimately depend on what kind of car finance deal you have and how flexible it is. 

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

The lender maintains ownership of the car during a hire purchase contract until you have paid off all of the agreement. Since they are the legal owner, you are not legally able to sell or trade in the car.

What you need to do is end the hire purchase contract early. There are a few ways you can do this, but in all cases you should be careful as you can easily end up out of pocket.

You can return the car if you have repaid less than half of the agreed loan. Before the lender lets you return the car you must have paid for half of the car’s value. This means you need to pay the outstanding monthly instalments to bring what you have paid so far up to half of the car’s value. If you have paid at least half of the total amount you may be able to return the car and cancel the agreement under the voluntary termination clause in your contract.

If you can afford to pay off the rest of the deal in one go, then you can settle the contract and take ownership of the car. You will have to contact your lender to negotiate a settlement value but after this amount is paid, the car is yours and you can sell it on.

Can I sell a car on an outstanding personal contract purchase (PCP)?

As with hire purchase agreements, you do not legally own your vehicle during a PCP agreement and so cannot legally sell it.

Also as with HPs, you can end your contract using the voluntary termination clause once you have paid half of the total amount due.

You can settle your contract by paying a settlement value agreed with your finance provider if you want to fully take ownership of the vehicle, but bear in mind that this will include a potentially large balloon payment.

Trading a car with outstanding finance

If you want to get rid of your car on finance because you are struggling to keep up with payments, then your best option is to arrange a voluntary termination.

If, however, you want to sell up and get a different vehicle, then you have two options.

First, you can settle up by contacting your finance provider and requesting a settlement valuation. If you have the money available, then once you’ve paid the settlement value, the car is yours to do with what you will, and sell however you want.

Alternatively, you can visit a dealership and, as long as the settlement value is less than the total value of the car, you can put the difference towards a deposit for a new car. In this case, you should first check the value of your current car, and the value of the car you intend to buy. Once you’ve worked out the value of the new vehicle, get a quote for a new car finance deal to see how much you’ll need to pay each month for it.

What is negative equity? 

If the remaining value you would need to pay to settle the finance deal is more than the total value of the car, then you are in negative equity. In this case, it may not make financial sense to settle up quite yet. You might be better off continuing with your finance plan until you have positive equity (i.e. the settlement value is less than the value of the car), and trading in then. This depends, of course, on your reasons for wanting to trade your car in the first place.

Getting a good deal on your car with outstanding finance

There are three bits of information it’s crucial for you to have to hand when you’re looking to get a good deal trading in your car with outstanding finance:

  1. The total value of the car
  2. The settlement value for the finance plan
  3. The value of the car you want to buy

Armed with this information, you should compare quotes for different types of car finance plan, so you can work out exactly how to get the best deal on your next vehicle.