A car is one of life’s major purchases but makes juggling your daily responsibilities much easier.
However, a sudden change in circumstances might mean making repayments on your car more difficult. Luckily, there may be a way to lighten the load on your repayments.
Depending on the finance method you used to purchase your car, it might be possible to sell your car if you can no longer afford the regular repayments. Read on to find out more about selling a car with outstanding finance.
Can I sell a financed car?
You can’t sell a car that was purchased through a seller via either a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement. That’s because, while there are payments outstanding, the car finance firm is still the legal owner – not you.
To sell your car, you’ll need to settle up with the finance company for the remaining balance of the purchase.
What happens if I sell a car with outstanding finance?
It’s illegal to sell a car on finance without first telling the buyer. The finance company may try to repossess the car from the buyer, and you could face fraud charges.
Can I sell my car with outstanding Hire Purchase finance?
No. Under the terms of Hire Purchase, the car isn’t yours until you’ve paid the full amount stated in your finance contract.
Once the car is yours, you can sell it. To do this you must pay the full amount to terminate the agreement. Contact the lender and ask for a settlement figure.
Can I sell my car with outstanding personal contract purchase finance?
No. Personal contract purchase is different to hire purchase. A PCP contract states you have to give the car back at the end of the agreement either way – unless you pay the final balloon payment.
Once you make the final balloon payment, the car is yours to sell on.
Selling a car bought with a personal loan
If you need the financial flexibility to sell your car before you’ve fully covered the cost, a personal loan could be a better option.
Taking out a personal loan to buy a car means you can pay in cash and take immediate ownership. You might find this gives you more choice over the car you buy, as well as more desirable terms when it comes to monthly repayments and the term of your agreement.
While this means you can sell your car before the loan is paid off, you’ll still be responsible for paying back the personal loan in full.
Alternatives to selling your car
There may be other ways to take control of your finances if you’re dealing with a long-term agreement such as car finance, such as consolidating outstanding credit into one payment with a debt consolidation loan.
Can I give a car back on finance?
You may be able to return a car on finance, so you don’t have to make any further payments. Check your contract to see if there’s a voluntary termination clause. However, returning your car early could affect your credit rating. Ask your lender for details.
If you’ve paid back less than half the balance of the agreement, you should be able to return the car. The lender may ask you to pay off the difference between what you’ve paid and 50% of the value.
In addition, you may have to pay an early exit fee on a car finance agreement – this should be a small percentage of the outstanding total.
Early settlement
If you want to end your car finance agreement early so you can pay the remaining balance on your car, you’ll need to know how much you owe the provider. Get in touch and ask for a settlement figure – the amount you’ll pay to settle the agreement with the lender.
The settlement figure will likely be less than the total cost of your monthly repayments (although it will probably include a fee for early repayment). That’s because the interest you’re paying overtime won’t be added on.
Once you’ve paid the early settlement figure in full, you’ll take full ownership of the car and be able to sell it.
Keeping up repayments
If you’re still planning to sell your car but can’t raise the cash to pay off an early settlement, you may find you’ll just have to grin and bear it until you’ve finished repaying the outstanding finance.
Check out our budgeting advice for ways to save on other monthly outgoings, so you can stay on top of car repayments.
Contact your car finance provider if you think you might miss repayments. They may be able to come up with a solution that eases your worries and ensures you can still make repayments.
For more about car finance, check out our articles on the Know How hub.
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