Can you sell a financed car?
Selling a car bought using finance isn’t easy – and isn’t always possible. Using car finance to purchase a car means that you don’t technically own the vehicle until the finance is settled.
Find out how you might still be able to sell your car and find out all the rules and regulations you’ll need to know.
How to sell a financed car
To sell a car on finance, you need to:
- Check your contract. It may have a clause called ‘voluntary termination’. If you have paid at least 50% of the total cost of the loan, you can hand back the car without any additional payments.
- If the contract doesn’t offer this as an option, you should contact the lender and ask for a settlement figure.
- You’ll need to pay this sum before handing the keys to someone else. It’s likely you may have an early repayment charge and administration fees to pay also. This can make it expensive to sell a car that’s still on finance.
- Once you’ve got your settlement figure and got an accurate valuation on your vehicle, you’ll need to make sure you’re not in negative equity. Take a look at our guide for more information on negative equity car finance.
Should we mention part exchanging in here too?
The difference between selling on PCP and HP
How to sell a car on HP
Hire Purchase (HP) is a type of loan which allows you to buy a vehicle without the need to pay the full value up front. Typically, you’ll pay a deposit and then have a set amount each month. It’s a very popular way to get the latest vehicle on the market, or upgrade to a newer model.
To sell a vehicle on HP you will need to end your HP agreement early by contacting the finance company. Once you receive your settlement figure you will have a set period of time to pay it off.
In some cases, if you’ve paid off less than half of the agreement’s total cost, you can return the car but you will need to make a lump sum payment to bring the value to 50%.If you have paid over the 50%, you will be able to return the vehicle.
Alternatively you can look to part exchange your vehicle.
How to sell a car on PCP
You can’t sell your vehicle if you have it on PCP finance as you don’t own the whole vehicle yet. Under the Consumer Credit Act 1974, you can return the car under the voluntary termination clause.
If you have paid 50% of the total amount payable, you can return the car. Alternatively, you can pay off the remaining balance of the loan and keep the car to sell on.
Can you sell a car bought with a personal loan?
Yes, you can sell a car if it has been bought with a personal loan as you technically own the whole car, no agreement has been placed against the vehicle. If you used a loan to pay for the vehicle, you will still need to make the monthly loan repayments, even if you sell the vehicle.
If you want to sell a vehicle that you bought using a personal loan, you can use the amount you sell the car for to pay off some or all of the remaining loan balance. If you repay the loan early, be sure to check whether you’ll be liable to pay an early repayment charge.
If you choose to use the money you make from selling your current vehicle to by a new car, you will still be responsible for paying the loan each month.
What are the risks of selling a car with outstanding finance?
Improved models boasting new features hit the market every year, so wanting to upgrade your current vehicle is normal. However, there are some risks that come with selling a car with outstanding finance.
· You need to make sure the balance has been closed before you sell. If you sell your car before checking that the finance has been settled, you could be committing fraud. Check with the finance company that all debt has been settled before selling.
· You may have fees to pay for paying the contract off early.
· A car’s value will depreciate quickly first, then ease off, but monthly payments will be based on an average. Because the value of the car can change, you could end up in negative equity, where the amount you need to pay off to sell the vehicle is more than the car is worth.
Can you swap finance from one car to another?
You can trade your vehicle in for a new model when you have finance on a car but the finance on the previous vehicle must be settled. You will need to contact the finance provider and ask for the settlement figure. Zuto can provide assistance if you want to change your car with outstanding finance.
What to do if you have a car on finance and can’t afford it
Car finance plans can span over five years or more, and circumstances can change a lot in that time. If you find yourself struggling to make the repayments, you should get into contact with the lender directly.
Remember that if you have HP or PCP, you can get voluntary termination if you have paid off half of the total balance. Missing payments can have a serious effect on your credit score, so if you are struggling, seek help and advice.
I have a car on finance and can't afford it, what can I do?
You should speak to your finance provider if you won’t be able to make your payments. There are certain circumstances where the agreement can be terminated, so don’t delay contacting the lender directly.
What happens if I don't pay my car finance in the UK?
If you don’t pay your car finance, or any loans, you will fall into arrears and the lender can repossess the car. This will affect your credit rating and hinder your chances of being offered credit in the future.
Is cancelling car finance within 14 days allowed?
Yes, under the Consumer Credit Act you have 14 days to withdraw from any credit agreement, whether you applied online, on the phone or in person.
What happens if my car is written off and it's on finance?
If you have accepted the car is a write-off, you will be offered a settlement price. Your insurance company may pay you for the vehicle, and this may cover the amount you borrowed, but sometimes it may not.
If it doesn’t cover the amount you owe, you will need to pay the remaining balance. For example, if you have a car on finance for £6,000, have paid £1,000, and the insurance company offer you £3,000 – you’ll need to find the remaining £2,000 owed on the car.