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Can You Sell a Car on Finance?

Posted on 5th February 2024
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Can You Sell a Car on Finance?

If you have a car on finance but feel it is time for a new vehicle, you may be wondering if you can sell the one you currently own. That’s not unusual. Many people ponder the same question, especially as almost all new cars in the UK are currently purchased on some kind of finance agreement.

Luckily, the answer is yes. Sort of. You can sell a car on finance but there are a few processes for you to work through first, and much depends on the kinds of finance agreement you have. A leased car for example cannot be sold, a car on PCP can. Subject to particular criteria being met. In this edition of our blog, we answer the question in depth so you can sell your financed vehicle legally and quickly.

Can you sell a financed car?

In most cases yes, but in some cases no. When you have a car on finance, you don’t have any legal right to the ownership of the vehicle, so in theory, it is not yours to sell until you have paid 100% of its worth. However, you can look to a major car dealer to lend a helping hand.

A dealership can help you settle your car finance, and then allow you to purchase a vehicle from them, either outright or on another finance agreement with them.

To do this, you would need to contact the company you hold a finance agreement with and ask for a settlement figure. This will be the amount they are willing to accept to clear the outstanding finance. If you have already paid more than 50% of the value, you may be able to have the agreement closed, under what is known as “voluntary termination”, more of which we will cover later.

For the time being, assuming you don’t own a large enough percentage for voluntary termination, you should request the settlement figure. This must be provided by the finance company within twelve days and is valid for ten. This amount must then be cleared by selling the car or paying the amount yourself.

Where the dealership comes in is with the offer on your vehicle. You can present them with a figure you will sell the car to them for (your settlement figure amount or higher) and then use this to clear the outstanding finance. However, in some cases, a dealer may offer less than the total amount outstanding. This would mean you have to cover any shortfall. If they offer more, you could find yourself making money that can be used towards your next purchase.

If you do not sell the car and clear the finance within ten days of receiving your settlement figure, you will need to apply for a new settlement amount.

If you were to sell the car without settling the finance first, you could find yourself charged with fraud. Selling a car with outstanding finance is illegal.

Now, we will look at the various car finance options and how selling your vehicle is possible with them.

How do I sell a car with outstanding PCP finance?

If you took out a PCP finance agreement to purchase your car, you must settle any finance before you sell it. This can be done following the method above by getting a settlement figure provided, approaching a dealer, and then clearing the finance. However, PCP works a little differently to HP or PCH.

With PCP, you pay a deposit on the vehicle and then follow that up with monthly payments over an agreed period. At the end of the agreement, the car will either be returned to the dealer or become yours after you make what is known as a balloon payment. With all monthly payments and the balloon payment made, you are the legal owner and can sell the car as you wish.

Should you not have completed the agreement, you should ask your finance company for the settlement amount. Just remain aware that this will include any outstanding monthly payments, the balloon payment amount, and any interest. Using this figure, you can then sell the car to a dealership for that amount to clear your outstanding finance and purchase a new car. Just be aware that the dealer may offer less, and, in these cases, you will still owe money on the finance agreement.

How do I sell a car with outstanding HP finance?

You can sell a car on HP finance just like you can sell a car on PCP finance, there just is not a balloon payment to be made. The monthly payments made for a car on HP tend to be higher than those on PCP. This is because the payments made on HP cover the entire cost of the vehicle, whereas PCP only covers the full value once the balloon payment is made.

Selling a car on HP is almost the same as selling a car on PCP. Simply ask for the settlement figure and sell your car to the dealer who can help with getting the settlement figure arranged. Or you can sell privately but you must clear the finance before the keys are handed over.

How do I sell a car with outstanding PCH finance?

You can’t. PCH finance is a fancier term for leasing. This means you simply pay to borrow the car. It never becomes yours outright and must be returned at the end of the contracted term. You may even find you owe more money upon the end of the agreement. If the car is returned and shows excessive wear, higher than normal mileage or damage, fees will be applied that can be much higher than you may have anticipated.

What is voluntary termination?

We mentioned earlier that you may be eligible for voluntary termination if you have a car with outstanding finance. Voluntary termination is a way you can end a finance agreement early, but it is not available in all cases.

There must be at least 50% of the total amount of finance paid, and the car finance must be for an individual, not for a business. You will need to write to your lender and inform them of your wish to begin the process of voluntary termination of your agreement.

Once started, you may find a few charges outstanding. These could be charges like those found with PCH finance. Excessive wear, high mileage, damage and more. Once paid, the car can be returned, the agreement ended, and you are ready to find a new car on finance.

Can I make money selling a car on finance?

In some cases, yes. This can be made simple if you were to clear the outstanding finance and then advertise your car at a higher price than the amount you spent on it. This can be tough though. Cars depreciate fast initially, so the sale price may not be as high as you had hoped.

Alternatively, if you are not able to purchase the car outright to end the finance agreement, a personal loan may offer you a lower rate than your finance and enable you to sell the car for a decent price that can either shrink the outstanding loan amount or be used for a new car.

Can you part exchange a car on finance?

Much the same as selling a car on finance, part/ex is also an option. Following a similar process, you would start by informing your lender of your wish to sell and that you require a settlement figure. Armed with this figure, find out how much the dealership or finance company will offer for the car you are trying to part exchange.

If the figure they offer you is more than what you currently owe, you’ll be in positive equity which can then be used for the new car you wish to purchase. You would simply pay the settlement amount to clear your outstanding finance, and then use the additional funds for your next new or used car on finance.

If though the amount owed to the finance company is more than you are offered for the vehicle, you’ll find yourself in negative equity. To settle this, you will have to pay the outstanding amount, but if using finance for your next vehicle, the lender may allow you to add that outstanding amount to your new finance agreement.

 

At Euphoria Finance, we keep car finance simple. Acting as a direct lender, we make it easy for all people to be accepted for car finance. Whether you are a new driver looking for first car finance or someone who has struggled with controlling finances before and is now in need of poor credit car finance, our team can help. Contact us today to get a free car finance quote and see how affordable it can be with Euphoria.

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