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Can I Sell a Car with Outstanding Finance?

It is a common occurrence that a customer buys a car and then changes their mind or wants to go for an upgrade later on before they have paid off their car finance deal.

Whatever the circumstances are as to why you want to sell, you may find it difficult to find a dealer who will buy a car with outstanding finance on it. This is largely contingent on what kind of car finance deal you have and how flexible it is.

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:

My car has outstanding Hire Purchase finance, can I sell it?

The lender maintains ownership of the car during a hire purchase contract until you have paid off all of the agreement. Therefore, your lender is still the legal owner and currently, you would not be allowed to sell it on.

The only way you can get around this issue is to end your hire purchase contract earlier than the contract termination date. However, there are specific rules surrounding this kind of contract termination which could potentially leave you 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.

Unfortunately, if you have already paid more than half of the agreed cost then you won’t be in a position to return the car. You will have to continue making the monthly repayments until the contract has ended. Bear in mind that the total agreed cost of the loan does include the interest you’ve paid and any other extras so half of the agreed cost will be slightly more than just the amount you borrowed.

Although you shouldn’t have to pay interest on early pay-offs, be aware that there is likely to be an exit fee associated with leaving a contract early. This will vary depending on your lender.

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

When you start looking for a new car, be sure to compare car finance deals to ensure you get the most competitive price out there. We can help to make this a hassle-free process so you can find your dream car.

Have you checked to see if your contract includes a voluntary termination option?

There may be a way to avoid paying any of these extra costs. If you check your contract and it includes a voluntary termination clause, then you can return the car without any other costs - if you have paid more than half of the total agreed amount.

Is it different for an outstanding Personal Contract Purchase deal?

The same rules apply with a Personal Contract Purchase deal - unless you have paid the whole agreed cost, you are not the legal owner of the car.

You have similar options as with a Hire Purchase contract. If you have paid back less than half of the agreed cost, then you can return the car once you have paid the remaining instalments up to half the car’s value.

If this doesn’t work for you then you can pay off the rest of the agreement cost early and keep the car or sell it on. The decision depends on what suits your needs and financial means best. Often, the settlement amount you agree with your lender is less than the amount you will end up paying if you carry on with your contract, so it is an option worth considering.

Can I part-exchange my car if it has outstanding finance?

The same applies as with selling a car. You must agree on a settlement figure with your lender before you are able to part-exchange the car.

Remember, it is illegal to sell someone a car with outstanding finance on it without telling them about it first. There is a database that will tell a dealer if your car has leftover finance on it so it is unlikely that they wouldn’t check this first.

How do I go about selling my car if it has outstanding finance?

Contact your lender and ask them for advice. Inform them that you plan to sell the car and ask them for a settlement figure to pay off the rest of your agreement. It is important that you get this figure and any related information on paper.

Check to see if your original contract discusses an early exit fee for leaving your contract before the termination date.

Next, you need to work out whether settling the contract will be cheaper than continuing with the monthly repayments of the contract. Get someone to value your car. This way you can work out whether selling your car on after settling the contract will cover the settlement amount you paid. If it doesn’t cover the whole settlement amount you can then calculate what you will have to cover yourself.

Make sure you can afford to pay the settlement figure including any surplus that is not covered by the sale of your car. Ensure you keep getting up-to-date valuations on your car when you are trying to sell it as the market can fluctuate frequently.