Selling a car that’s still under finance is possible, but you’ll need approval from the finance company.
With HP car finance, remember that the car legally belongs to the finance company until you’ve made the final payment. It's important to understand the terms of your agreement before trying to sell the car.
Understanding your finance agreement
If you're thinking about selling a car with outstanding finance, it's important to talk to the finance company first and explain why you want to sell it.
Depending on your situation, they might give you permission to go ahead. Always speak to your finance company first, as there could be consequences if you sell without their permission.
Selling a car with outstanding finance
You have a few options if you decide you want to sell your car and it has outstanding finance:
Settle the existing finance first
By paying off the outstanding balance, the car will legally be yours, and there will no longer be any finance attached to it. This helps you avoid any issues around selling a car still on finance.
If you want to do this, follow these steps:
- Contact your finance provider: Ask for the hire purchase early settlement figure.
- Pay the settlement amount: Pay off the remaining balance to clear the finance.
- Obtain a clearance letter: Once the finance is paid off, obtain a clearance letter from your finance provider, confirming the car is free of finance.
- Sell the car: You can now sell the car privately.
Trade-in the car at a dealership
Many dealerships offer the option to trade in your financed car when you buy a new one. The dealership will handle paying off the finance agreement on your behalf.
To do this, follow these steps:
- Get a settlement figure: Contact your finance provider and let them know you are interested in settling your car finance early.
- Visit a dealership: Discuss the trade-in value of your car with the dealership. It's a good idea to visit several dealerships nearby, to compare quotes and ensure you get the best price for your car.
- Complete your trade-in: The dealership will pay off the outstanding finance on your agreement and deduct the settlement figure from the trade-in value. Any remaining amount can be used as positive equity on a new car.
What if I have negative equity?
Negative equity happens when your car is worth less than the remaining balance on your finance. This usually happens if the car's value has significantly dropped since you first bought it.
In this situation, you'll need to pay the difference to fully settle your finance contract, regardless of what type of finance you have.
Use a specialist car buying service
Some companies specialise in buying cars that are still under finance agreements. They will handle paying off the hire purchase early settlement figure when they take your car.
- Get a settlement figure: Contact AutoMoney Motor Finance or your finance provider and request the settlement figure for your car finance.
- Contact a car buying service: Provide them with details about your car and finance agreement.
- Receive an offer: The service will make an offer on your car.
- Complete the sale: The service will pay off the finance agreement and transfer any remaining balance to you.
Selling a financed car involves a few extra steps compared to selling a car you fully own. Whether you decide to pay off the finance first, trade it in, or use a car buying service, it's important to check that all outstanding finance is cleared and you receive confirmation that the agreement has been settled. This will give you peace of mind and help you avoid any unexpected issues later on.
What could happen if I try selling my financed car without approval from the finance company?
Selling a car with outstanding finance, without the consent of the finance company, can lead to serious consequences for both yourself and the new keeper of the vehicle. It’s important to understand the potential risks before considering selling a financed car, so you avoid making a mistake.
Risks of selling a car with outstanding finance
- Breach of contract: When you finance a car, the car legally belongs to the finance company until the agreement is fully paid off. Selling the car without their consent breaks the contract, which could lead to legal action or the finance company repossessing the car.
- Negative impact on your credit file: Failing to follow the terms of your finance agreement, such as by selling the car without approval and not settling the finance owed, can lead to a default being recorded on your credit file. This can severely damage your credit score, making it more difficult for you to borrow money in the future.
- Complications for the buyer: The new keeper of a car that is still under finance may unknowingly purchase a vehicle that is still legally owned by a finance company. This could lead to the car being repossessed, leaving the buyer without a vehicle and potentially seeking compensation from you.
- Financial liability: If you sell the car without paying off the finance, you are still responsible for the outstanding balance. The finance company may demand full payment of the balance immediately, and if you’re unable to pay, they could take further legal action against you.
Given the risks involved with selling a financed car, it's important to always get approval from the finance company before selling a car with outstanding finance. This ensures that both you and the buyer are protected from any legal or financial repercussions.
We have a guide to help you if you have recently bought a car with outstanding finance.
Sell a car on finance or apply for car finance with us
If you need to talk about selling a car still on finance with us, contact our Customer Support Team on the freephone number above to discuss your options.
We can also help you apply for finance on a car. Call the “New customers” number above (calls are free from a mobile or landline), get in touch via our live chat facility, or apply online.
Representative example
You could borrow £10,000 over 60 months with an initial payment of £490.66 (including £199 Admin Fee) followed by 58 monthly payments of £291.66 with a final payment of £490.66 (including optional £199 Option to Purchase Fee).
Total amount repayable will be £17,897.60.
29.3% APR, annual interest rate (fixed) 24.7%.
This example uses the representative APR. This is the rate at least 51% of customers are expected to get.
Lending is subject to status and additional affordability checks. Rates quoted are subject to change and will depend on lending amount and personal circumstances.
FAQs
Yes, you can sell a financed car with the finance company’s consent. You must either pay off the finance first or ensure the buyer knows about the outstanding finance.
When selling a financed car, you’ll need the settlement figure from your finance company, a clearance letter after paying off the finance, and the car’s logbook. If you’re trading in at a dealership, they may also need additional documentation, such as service history records.
If you can’t pay off the finance before selling your car, you have a few options. You could trade in the car at a dealership that will pay off the finance for you, sell the car to a specialist car buying service that handles financed vehicles, or arrange for the buyer to settle the finance as part of the sale. You’ll still need consent from the finance company before you proceed.
To check if a car has outstanding finance, you can get a vehicle history report from a service like HPI Check, which will show if there’s any outstanding finance on the vehicle.
After paying off your car finance, it will usually take a few days to receive a settlement letter, but it can vary depending on the company. Make sure to request this letter right away to give you peace of mind that you can continue selling your financed car with no issues.