Can You Sell a Car on Finance?

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.

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Can I Sell a Car on Hire Purchase Finance?

With hire purchase, often called HP, you pay off the car little by little every month. At the end of the agreement, once everything has been paid, you own the car.

If you have not paid off the full amount, the finance company is still the legal owner of the car. This means you cannot normally sell it without settling the finance first.

If you wish to sell the car, you will need to contact the finance company and ask for a settlement figure. They can usually provide this quickly, although it may sometimes take a few days.

If you are looking to trade in your vehicle, the dealer may be able to request this figure for you and include it in the calculations for your next car.

Paying the car off early may save you money on interest, but the finance company may charge an early settlement fee. It is always worth checking this before making a decision.

Can I Sell a Car with Outstanding PCP Finance?

Unlike a HP agreement, Personal Contract Purchase, or PCP, usually finances the depreciation of the car while you have it. This is the amount the car is expected to drop in value from the start of the agreement to the end.

This is why PCP monthly payments are often lower than HP payments. However, there is usually a larger final payment, often called a balloon payment, if you want to own the car at the end of the agreement.

If you want to sell the car before the end of the PCP agreement, you will usually need to contact the finance company and arrange a settlement. The car will need to be paid off before it can be sold.

This can sometimes work in your favour. If the car is worth more than the settlement figure, you may have equity in the vehicle. This could help you move into a newer car sooner, especially if you are close to the end of your agreement.

Talk to the experts at Eden and they will be able to help you understand whether this is the case for you.

Can I Sell a Car Bought with a Personal Loan?

A bank loan is also called unsecured lending. This means the lender does not legally own the car, and you are free to sell it whenever you choose.

However, you will still need to keep making the loan repayments, even if you sell the car. If you do not keep up with the payments, the bank or finance company can take action to recover the money you owe.

Can I Sell a Car on a PCH Agreement?

You cannot normally sell a car that is on a Personal Contract Hire agreement, also known as PCH.

PCH is a form of leasing. It is a little like renting a car for a number of years rather than a few days. You never own the car, and the company will expect it back at the end of the agreed term.

Unlike PCP, there is no automatic option to buy the car at the end. Some finance companies may be willing to provide a figure to transfer ownership, but this is not guaranteed.

How to Sell a Car with 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.

What Happens If the Finance Is More Than the Car Is Worth?

If your settlement figure is higher than the value of the car, this is often called negative equity. It means the car is worth less than the amount still owed on the finance.

For example, if your car is worth £10,000 but your settlement figure is £11,500, you would have £1,500 in negative equity.

In this situation, you may need to pay the difference yourself. If you are part exchanging the car, the dealer may be able to explain your options and show you how the figures would work with your next vehicle.

Can Eden Help Me Sell a Car with Finance Outstanding?

If you are unsure what to do next, Eden can help you understand your options. We can look at your current vehicle, discuss your finance agreement and help you work out whether selling, part exchanging or keeping the car is the best option.

You can also read our guide to PCP and HP finance if you want to understand the difference between the two types of car finance in more detail.

If you are thinking about changing your car, you can also explore our car finance options or start by getting a valuation for your current vehicle.

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