When you signed on the dotted line for finance on the car you are driving now, you will undoubtably have done so with the best intentions. But none of us have a crystal ball, and things change. Perhaps you are struggling with the payments, or you suddenly need a bigger car as the result of a new baby or different job. Maybe you just fancy a change!
As the car is on finance, you need to know your options before you sell it on or trade in. The experts at Eden will be happy to guide you through the options and tell you the figures which will hopefully make it work for you.
If you are selling to a dealer, car auction or trading in, the business will do a check on the car’s data (often called a HPI check) to see if there is any finance owing. Many private buyers will do the same, and it’s certainly something we’d recommend. This is to check that the finance company is not the legal owner of the car, otherwise it could be reported as stolen if it were sold on and repossessed.
If there is money owing, the dealer will usually ask you to settle before they will buy it, or they can deal directly with the finance company and ask for a settlement figure. They will then deduct this from the money you will receive.
The rules surrounding the amount you will be charged and when you can end the agreement will depend on the type of finance you took out. Here are the different types, and our experts’ advice on how to change or sell a car if it still has outstanding finance.
A bank loan is called ‘unsecured lending’, which means the lender does not legally own the car and you are free to sell it whenever you choose. However, if you don’t keep up the payments, the bank or finance company will take action to try and recover the sum you owe.
With hire purchase, you are paying off a little amount every month and at the end of the agreement you will own the car. If you haven’t paid off the full amount, the finance company is still the legal owner of the car, and you won’t be able to sell it without settling with them.
If you wish to sell the car, you will need to contact the finance company and ask them for a figure to pay off the finance. They can usually do this instantly, but it may sometimes take a few days. If you are looking to trade in a vehicle, the dealer may be able to do this for you and then include the figure in calculations for finance on a new car.
Paying the car off early will save you on interest payments, but the finance company is entitled to charge you an early settlement fee.
Unlike a HP agreement, Personal Contract Purchase schemes only finance the depreciation on the car while you have it – that’s the amount the car drops in value from when it is new until the end of the arrangement. This means the monthly payments are far smaller, but there is still a large ‘balloon’ payment due at the end of the agreed term which will have to be paid off before you can sell the car.
If you want to sell the car before the end of the agreed term you will have to contact the finance company and arrange a settlement. This may be a good idea financially as the car may be worth more than the settlement figure and it will allow you to upgrade to a newer car faster, especially if you are nearing the end of the agreement. Talk to the experts at Eden and they will be able to tell you if this is the case for you.
You can never sell a car which is on a Personal Contract Hire agreement. It is a form of leasing, which is essentially a little like renting a car for a period of years rather than days. You never own the car and the company will be expecting it back at the end of the agreed term. Unlike with a PCP, there is no obligation to sell the car to you either, although some finance companies may be willing to provide you with a figure to transfer ownership if you are keen to keep it.