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Can you sell your car if you’re still paying for it through a finance agreement? Our guide explains your options.
Published: 10 October 2023
If you are paying for your current car via a finance agreement but you want to sell it, you might be wondering what your options are. Is it possible to sell a car that you still owe money on, and what are the issues you need to be aware of? We’ve got the answers here.
It is possible to sell a financed car but you must meet certain conditions first. In short, if you have a hire purchase (HP) agreement or a personal contract purchase (PCP) agreement, you’re the car’s registered keeper but you don’t actually own it until you’ve paid all your monthly instalments plus any option-to-purchase (OTP) fee, and in the case of a PCP the final ‘balloon’ payment.
Here’s why: the finance company is lending you money to pay for the car and if you want to sell it before you’ve made all the payments, you’ll need to pay back (or settle) the loan. This amount – calculated by the finance company – is known as a ‘settlement figure’ (more on this below). Selling the car without paying off any outstanding money owed is illegal and could have serious consequences for you.
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The settlement figure is the amount you need to pay to clear your debt to the finance company so you can become your car’s legal owner. You can request a settlement figure from your finance company at any time, and it should send the figure to you within 12 days.
The finance company will calculate the amount you’ll need to pay by adding up your remaining repayments and any other fees and taking away any future interest. Keep in mind that some lenders will also ask you to pay an early settlement fee, so you should double-check your agreement.
Yes, you can sell a car you have on PCP finance but only if you settle your outstanding finance agreement first.
With a PCP finance agreement, your loan will be secured against the car, so you won’t be its legal owner during the agreement term. And you can’t legally sell a car unless you are its legal owner.
PCP loans typically last between two and four years, and once you reach the end of the agreement, you have options. You can choose to return the car to the lender, put any positive equity towards a new finance agreement, or pay the final balloon payment plus any OTP fee to become the car’s legal owner.
To sell the car during your PCP agreement, you’ll first need to pay the settlement figure. This will include any outstanding finance payments as well as the balloon payment.
As with PCP finance, you can sell a car on HP finance once you’ve paid what you still owe.
With an HP agreement, your loan is secured against the car, and you won’t be its legal owner until you’ve paid all of your monthly instalments plus any OTP fee.
If you want to sell a car that you’re financing through an HP agreement you’ll need to request the settlement figure. Once this amount has been paid, the car will be all yours and you’ll be free to sell it.
No, you can’t sell a car that you pay for through a car lease (or personal contract hire [PCH) agreement because this is a long-term rental contract rather than a type of car finance.
In some cases, the lease company might let you negotiate to buy the car at the end of your rental term, but they’re not obliged to offer this option. Ending a lease agreement early is also possible, but doing so often comes with additional charges.
Yes, you can sell a car that you’ve bought with a personal loan (sometimes called a bank loan) because you’ll own the car outright from the start. That means you can sell the car any time you like, although you’ll still have to pay off the loan either by continuing your monthly repayments or by paying off the loan early.
If you choose to sell the car and pay off the loan early, you may be charged an early repayment fee, so you should check the terms and conditions of your loan agreement.
Many car dealers can settle the outstanding finance on a car if you plan to part-exchange it and buy your next car from them. The process is the same as it would be if you were to settle the finance yourself; the dealer will request the settlement figure from your lender and pay it on your behalf.
You might need to request the settlement figure, but sometimes the dealer and the lender will settle everything by themselves. If you’re concerned about how it all works, don’t panic; most dealers are very familiar with this process and will be happy to help guide you through.
Yes, you can sell your car to a private buyer with outstanding finance, but only if you’ve settled the debt first. It’s illegal to sell a financed car privately without letting the buyer know and you could even be charged with fraud if you do this.
Instead, before offering your car for private sale, request your settlement figure and pay off your outstanding finance so you become the car’s legal owner.
If you knowingly sell a car with outstanding finance, you’re breaking the law. Legal action might be taken against you if you fail to settle your debt first.
You’ll find lots of used cars for sale at Cazoo, all available to buy through our trusted dealers.
Cazoo makes selling a car just as easy – just enter a few details for an instant online valuation. If you accept the offer our partners will get in touch to arrange payment and collection of your car at a time that suits you.
