Wednesday 27 November 2019

Is it possible to sell a car on finance?

When you agree to take a car on finance, you are locked into a deal with the finance money and have agreed a specific period in which to pay them back. But have you ever considered trying to sell the vehicle you have on finance?

Unlike selling a car you own, selling a car on finance has a lot more legal implications as you are not the legal owner of the vehicle until you have paid the full amount of the car back. In this article, we’ll look at what car finance is and whether you can sell a on finance.

What is a car on finance?
Firstly, we need to know exactly what car finance is. You’ll often see on car adverts and in dealerships the option to purchase a car on finance, but do you know exactly what this implies?

Unfortunately, it isn’t as simple as just ‘car finance’, there are several different forms of finance that you can choose. Which option you choose depends on a variety of factors such as how long you want to keep the car and how much you want to pay back.

Personal Contract Purchase (PCP)
This is by far the most popular method of car finance in the UK. When you begin paying finance on the vehicle, the company lending you the vehicle are still technically the owners until the end of the agreement. At the end of the contract you either exchange or return the vehicle, of pay off the full amount and are officially the owner.

Lease/Contract Hire
Contract hire is another frequently used method of purchasing a new vehicle and again the lender of the vehicle continues to be the owner throughout the contract. Essentially you are hiring the vehicle from the company, when the contract is up however, you don’t usually have the option to buy the vehicle, and can only upgrade or give it back.

Hire Purchase
With hire purchase it is a fairly similar system to the two above, you are again only hiring the vehicle from the lender whilst payment is made. At the end of the contract there is usually an ‘option to purchase fee’ that you will have to pay if you want to buy the vehicle outright at the end.

Can I sell a car on finance?
If you have not settled the payment with the finance company, it would be illegal to sell your vehicle as you are not the owner at this point. If, however, you have settled the finance agreement and are the legal owner, only then can you choose to sell the car.

In a similar manner, you are also not allowed to transfer the agreement over to someone else. When you go through the contract with the dealership, you go through several checks to ensure that you are able to afford repayments. If you wanted someone else to have the vehicle instead, they have not been through the required checks that are necessary.

Selling a financed car can be a difficult task, however if it is something you want to do, the only way to do so is by settling the agreement early and paying off the car. If you take out a PCP or hire purchase agreement, you are legally allowed to end the deal early so long as you pay a ‘settlement figure’. This is what you will have to pay to clear any finance left on the vehicle.

Once this has been completed and agreed with the lender you will be the legal owner of the vehicle and are free to sell it as you please.

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