Thinking of Selling a Financed Car? Here's What to Consider
If you're thinking, can I sell my financed car, there are a few things to consider. Although you may have possession of the car, the finance company holds legal ownership until the loan is completely paid off. This means you can't sell it until everything is sorted out. Not informing a potential buyer about the outstanding finance is illegal, so it is critical to do things the right way. In this guide, we'll go over the steps you need to take, including how to perform a Car Finance Check before making any decisions.
Can You Sell a Car with an Outstanding Hire Purchase Agreement?
Can you sell a car on finance? Selling a car with outstanding Hire Purchase (HP) finance isn't as simple as putting it on sale. In fact, you cannot sell it until the finances are settled. This is because, under HP, the finance company legally owns the vehicle until all payments are made. So, what options do you have if you need to sell a financed car before the agreement expires?
Ending Your Hire Purchase Agreement Early
If you want to sell a car before the finance is settled, you must first obtain a settlement figure from your lender. This is the amount you must pay to clear the outstanding finance, and it may include additional charges such as an 'early exit fee.' Once you have paid this amount, you can sell a financed car. Keep in mind that you will have a set time to make the payment, so plan accordingly.
Returning the Car
If you paid less than half of the total cost of the vehicle, you may be able to return it. You'll need to agree to continue paying the remaining instalments that cover half the car's value. If you have already paid more than 50%, this option may not be available to you, and you will need to consider other options.
Voluntary Termination
If your contract includes a voluntary termination clause, you may be able to return the car without paying any additional fees. This is usually only available after you've paid at least half of the total cost, including interest and fees. It's an excellent option if you want to avoid future payments and no longer want the car. Voluntary termination rarely has an impact on your credit score.
Selling a Car Still Under a Personal Contract Purchase (PCP) Plan
Sell car on finance? Selling a car that is still under a Personal Contract Purchase (PCP) plan can be challenging. You won't be able to sell your car until the loan is fully paid off or you've cleared the settlement amount. So, what do you do if you want to sell before your contract expires?
Paying Off the Settlement Figure
One option is to pay off the PCP agreement early by requesting a settlement figure from your financing company. Once you've paid this amount, you'll own the car outright and can sell it. Sometimes it is more cost effective to pay off the loan early rather than making monthly payments. However, keep in mind that once the finances are settled, you will be unable to change your mind.
Returning the Car
Another option is to return the vehicle to the financing company. If you have already paid off at least half of the agreement, including interest and fees, you may be able to return the vehicle without making any additional payments. If you haven't paid half yet, you could still return the car by making a final top-up payment to cover the remaining balance.
Things to Remember
It's important to note that requesting a settlement figure does not imply that you're ready to settle the loan right away. If you miss the settlement date, you can always ask for a new settlement figure. Once you've settled the outstanding amount, you're free to sell your car.
How to Sell a Car with a Personal Contract Hire (PCH) Agreement
Selling a car with a Personal Contract Hire (PCH) agreement is quite different from selling a car on finance. With a PCH deal, you're essentially renting the car for 2-4 years and never owning it. You make an initial deposit, followed by fixed monthly payments for the term of the lease. You cannot sell the car because it remains the property of the leasing company, unlike a car that is financed.
At the end of the lease, you must return the vehicle to the leasing company, but you may be charged an additional fee if the vehicle has more damage than "fair wear and tear" or if you have exceeded the agreed-upon mileage limit. Some leasing companies may offer you the option to purchase the car, but they are not required to do so.
Will a Dealership Handle the Finance When Buying My Car?
When purchasing a car, a dealership may handle paying off your existing outstanding finance as part of the transaction. Before moving forward, ensure you're not in negative equity. This situation arises when the current value of your car is lower than what you still owe on the loan. If you find yourself in this predicament, it may be worth holding on to your car a little longer or covering the difference out of pocket.
If you decide to proceed with the sale, you can start searching for a new vehicle. You may also consider refinancing options, in which a new finance deal includes paying off your current car's outstanding finance as well as the loan for your new vehicle. If approved, your new monthly payments will include both.
In the case of part-exchanging your car, the value offered by the dealer will be deducted from the total amount you owe on the new car, which can help reduce your overall borrowing costs. Just remember to get a settlement figure and have your car's value assessed before making any decisions.
Can You Sell a Car to Clear the Remaining Finances?
You can only sell your car after you've paid off the remaining finance, which includes the full settlement amount. This often requires a lump sum payment. Another option is to include the sale in a refinancing deal. However, be careful, as you might end up in negative equity if the car's value is less than the settlement amount. It's important to ask the finance company for a detailed breakdown of the costs involved in settling the finance. Also, before selling, you should do a car reg check to ensure there are no surprises with your car's status.
Selling a Car While Still Making Finance Payments
Yes, you can sell a car on finance while still making finance payments, but this is not the same as selling a car bought with a personal loan. With a financing agreement, the car is secured against the loan, which means the finance company technically owns it until the agreement is paid off. However, with a personal loan, you own the car from the start and can sell it whenever you want. Just remember, even if you sell the car, you're still responsible for finishing the payments on the loan.
Step-by-Step Guide to Selling a Financed Vehicle
Request Your Finance Settlement Letter
To get started, notify your finance company that you intend to sell your car. Request a settlement letter that specifies the exact amount required to clear the finance. To avoid surprises, make sure to ask if your contract includes any early settlement fees.
Getting a Valuation Before Selling
Before selling your car, you should know how much it is worth. Use a free online valuation tool to get an accurate market price. This will help you ensure that the sale price covers the outstanding finance so you don't end up owing more than you get from the sale.
How to Prepare Your Car for Sale
To get the best price for your car, gather all relevant documents, such as the V5C logbook, full-service history, MOT check, and MOT certificate. Clean your car both inside and out, repair any minor damage, and make sure you have a spare key. These simple steps will help you increase your car's value and make it more appealing to potential buyers.
What to Expect from a Buyer's Offer
When you receive a buyer's offer, make sure it reflects the market value of your car. If there is damage or high mileage, the offer may be lower than expected. Keep in mind that dealers may offer lower prices than private buyers, but they handle the paperwork and finance settlement, making the process easier for you.
What Happens After You Accept an Offer?
When you accept an offer, the dealer will arrange to pick up your vehicle for free. Make sure you have all of your paperwork, keys, and locking wheel nuts ready. The payment is usually made on the same day that the car is collected, so you'll get your money quickly, and the sale will be completed.
How to Settle Outstanding Finance Before Handing Over the Car
To settle your outstanding finances, the dealer may handle the payment directly with the finance company. If not, you will have to pay the settlement amount yourself, typically by phone or online banking. Before handing over the car, confirm the exact process with both the dealer and the finance company.
Final Steps to Complete the Sale
Once your finance is fully settled, you will legally own the vehicle. At this point, you can complete the sale by signing the necessary paperwork with the buyer. This final step ensures that ownership is transferred smoothly, and you can walk away knowing everything is in order.
Will There Be Any Surplus Funds After Settling Finance?
If you sell your car for more than you owe on the loan, you will receive the remaining balance once the loan has been paid off. This surplus can be used for your next purchase or put toward other expenses, providing you with additional funds from the sale.
