What happens if I buy a car with outstanding finance?

Purchasing a vehicle with car finance lets you pay back the total cost in affordable monthly instalments, providing you with greater flexibility in choosing your car and budgeting your costs, and letting you keep your finances in check.

But what do you do when you accidentally end up buying a car with outstanding finance? And what does buying a car with outstanding finance even mean?

If you’ve already bought a car with outstanding finance and want to know your next steps, or want to avoid doing this in the future, we’re breaking down what outstanding finance on a car is, what your rights are, and how you can check if a car is financed before you buy it.

What is outstanding car finance?

Outstanding car finance, as positive as it might sound, doesn’t mean good car finance in terms of credit. What it actually means is that the car in question still has payments that need to be made from a previous finance agreement.

These repayments are usually part of a HP car finance or PCP finance agreement which the previous owner had not fulfilled before selling the vehicle. As a result, until the remaining payments are made, the finance company that issued them is still the owner of the vehicle.

If you found yourself in this situation, what this would mean is that all debt associated with the vehicle is then transferred to you as the new vehicle keeper, and it would be your responsibility to settle the debt.

Can a car be sold with outstanding finance?

Unless in very specific circumstances, no; it’s illegal to sell a car that is being financed, without the owner’s permission. As the person making the finance payments doesn’t own the car, this means it’s up to the finance company as to whether or not the car can be sold.

Generally speaking, any finance must be paid off and ownership of the car legally transferred, before the car can be sold to another owner.

Buying a car with outstanding finance privately

Buying a car privately is the most common scenario in which outstanding finance issues occur. It may be a case that the seller was aware of the car's finance history or had no knowledge at all, but either way, it can be a nasty surprise to have sudden debt dropped on you.

The first time you’ll likely be made aware of this debt issue is by communication from the finance company, who will be looking for you to either complete the remaining payments or return the car.

What are my rights if I bought a car with outstanding finance?

First and foremost, if you’ve bought a car that has outstanding finance that you were unaware of, don’t panic. You don’t have to return the car, as you’re protected by something called ‘good title’.

A good title is something you gain when you buy a car in good faith and have no prior knowledge of the car and its finance history.

I bought a car with outstanding HP finance: what are my rights?

It doesn’t matter what type of finance was used to buy a car. No matter if it was HP finance or PCP, if you have no knowledge of a car's finance history, you will automatically have a good title.

The process for releasing a car from its current finance

There are a few ways in which a car bought with outstanding finance can have the previous debt wiped. Once the finance company gets in touch with you, you can choose to settle the remaining finance; but as this is money you don’t need to pay, it’s not recommended.

To help bolster your claim of good title, be sure to provide any evidence of the car purchase, its ad if still available, and communication prior to purchasing, as well as getting in touch with the previous owner to ascertain if they were aware of the car’s finance history.

Buying a car with outstanding finance from a dealer

In some cases, you might find that you’re buying a car with outstanding finance from a dealer. In this case, a dealer should know if a car has outstanding finance, and if they don’t, a good title will still apply to you.

If you decide you do want to buy a car with outstanding finance from a dealer, all debts should be paid off by the dealer at the point of sale. You should receive written confirmation and it should be discussed well before any money is handed over.

If they refuse to do so, get in touch with our team of experts to discuss alternative finance options for your chosen vehicle make and model.

How to check if a car is financed?

The best way to check if a car is financed is to ask the dealer or seller. If they don’t know, Zuto can help as we offer a free vehicle history check on all cars available in your MyZuto account area. Just get in touch with our team of experts today to find out more information.

From hire purchase to PCP, and even car finance with bad credit, we’ve plenty of loan options to suit you. For more information, visit our help and advice page, or for more helpful articles head over to the Zuto blog.