Can you sell a car on finance

It may seem impossible to sell a car that still has money owed on it, but thousands of car owners do it every year. Knowing your options can help you avoid making expensive mistakes and getting into legal trouble, whether you’re having trouble with money, need to upgrade your car, or just want to switch cars.

Yes, you can sell a car on finance, but you need to plan carefully and follow certain steps. This comprehensive guide will walk you through everything you need to know about selling a financed vehicle, from understanding your legal obligations to exploring alternative options that might better suit your situation. 

A lot of people think they have to keep their car until the loan is paid off, but this isn’t true. You can legally transfer ownership and pay off your debt at the same time if you do it the right way. But there are a few important steps that must be followed exactly to avoid serious problems.

Learning About Car Financing Options

It’s important to know what kind of financing agreement you have before you start selling, because this will affect the options you have for selling.

HP Agreements for Hire Purchase

You don’t technically own the car until you’ve made all of the payments, including the last balloon payment, with a hire purchase agreement. You can’t sell the car without the finance company’s permission because they own it legally. But this doesn’t stop you from selling; it just makes the process take longer.

Agreements for Personal Contract Purchase (PCP)

Like HP, PCP agreements mean that the finance company keeps ownership until the last payment. These deals usually have lower monthly payments and a big final payment if you want to keep the car. If you want to sell while you have a PCP agreement, you have to pay off the balance first.

Personal Loans 

You own the car outright if you bought it with a personal loan. This makes it much easier to sell because you can give up ownership right away. You will still need to use the money from the sale to pay off the rest of the loan, though.

Is it possible to sell a car that you owe money on? The Straight Answer

You can sell a car on finance, but you have to pay off the remaining balance before you can legally give the car to the new owner. This is a legal requirement that you can’t get around.

The finance company has a legal claim on the car until the debt is paid off. If you try to sell something without paying off this debt, you are committing fraud and could face serious legal consequences, such as going to jail.

What happens if you sell something without permission?

If you sell a car with outstanding payments without following the right steps, you could:

• Charges of fraud in the criminal system
• The finance company taking back the car from the new buyer
• You remaining liable for the full outstanding balance 
• Hurt your credit score
• The buyer and the finance company could both sue each other.

Steps to Selling a Car with Outstanding Finance 

Step 1: Get in touch with your finance company.

Always call your lender first. Explain your situation and ask for a settlement figure—this is the amount needed to clear your debt completely. Settlement amounts are usually good for 30 days and may include fees for settling early.

Most finance companies are used to these kinds of requests and can help you through their specific process. Some may even offer to handle the sale themselves.

Step 2: Find out how much your car is worth

To find out what your car is worth on the market right now, get accurate estimates from a number of different sources. Use online valuation tools, go to local dealerships, and think about getting professional appraisals. This helps you figure out if you will have positive or negative equity.

Step 3: Figure Out Your Financial Situation

Look at how much your settlement is worth compared to your car’s value:

• Positive equity: means that your car is worth more than what you still owe on it.
• Negative equity: You owe more than the car’s value 
• Break-even: The values are roughly equal 

Step 4: Pick a way to sell

You can sell in a number of ways:

Private Sale: Usually gets the best price, but it takes more work and is riskier when money is involved.

Dealer Sale: Many dealers will take care of the financing settlement process, which makes it easier but may not make as much money.

Services for Buying Cars: Companies that buy cars for a living can often handle the financing themselves, which is more convenient than making the most money.

Step 5: Do the transaction right

For private sales with unpaid debts:

1. Set up a time to meet at the bank or the office of the finance company.
2. Have the buyer send the settlement amount straight to the finance company.
3. Take any extra money you have as profit.
4. Ensure all documentation is completed before the buyer takes possession 

If selling through a dealer or car buying service, they typically handle the finance settlement as part of their standard process. 

Can you sell a car on credit and then pay it off?

This method means selling the car and using the money to pay off the debt right away. It is possible, but it needs careful planning to make sure it follows the law.

The Process

1. Find someone to buy it and agree on a price.
2. Make sure that the money from the sale goes straight to paying off the loan.
3. Finish the deal only after the money is all settled.
4. Once the finance company releases their charge, you can transfer ownership.

Things to think about when it comes to risks

• The buyer needs to be patient while the money is cleared.
• You’ll need to coordinate timing between the sale and settlement 
• You must make up for any shortfall right away

How to Sell a Car on Credit In private

Private sales can give you the most money, but you need to be extra careful when money is involved. Is it possible to sell a car privately while still paying for it? Yes, but you need to follow certain steps to keep both you and the buyer safe.

How to Sell Things Privately

Be Transparent: Always tell people who are interested in buying the car that it has outstanding debt. Being honest builds trust and keeps you out of trouble later.

Safe way to pay: Have the buyer pay the settlement amount directly to the finance company and any remaining balance to you.

Papers: Keep track of all your conversations and transactions. Once the debt is paid off, get a written confirmation from the finance company.

Meet in places that are neutral: To make sure the transaction is safe and the paperwork is done right, think about doing it at the finance company’s office or a bank.

Alternatives to Selling Your Financed Car

Part-Exchange Options

A lot of dealers will let you trade in a financed car. They take care of the settlement process and use any extra equity to help you buy a new car. This option offers convenience but may not achieve the highest price for your current vehicle. 

Ending a contract on your own

You may have the right to end your finance agreement early if you’ve paid at least half of the total amount due, according to the Consumer Credit Act. You can give the car back without paying anything else, but this could hurt your credit score.

Refinancing

Sometimes, refinancing your current agreement can give you better terms or lower payments, so you don’t have to sell. Talk to your current provider or look for better deals.

Early Payment

If you have savings or access to funds, paying off the finance early might be more cost-effective than selling, especially if your car has negative equity. 

What it means for your money and the law

What You Can Do as a Buyer

If you bought a car with outstanding finance without knowing it, your rights depend on whether you did so in good faith. The finance company might be able to get the car back, but you might be able to sue the seller.

Effects on Credit

How you sell your financed car can affect your credit score. Paying off your debt early may have a neutral or slightly positive effect, but not paying it back or committing fraud will hurt your credit score a lot.

Will the Finance Company Find Out If You Sell?

There are many ways that finance companies can keep track of their cars, such as:

• DVLA records that show who owns what
• Monitoring the insurance database
• Alerts from credit reference agencies
• Inspections in person

If you try to sell without permission, you will probably get caught, so being honest is the only smart thing to do.

Advice for a Successful Sale

Find out what things are worth right now

Use more than one source to figure out how much something is worth, and think about things like mileage, condition, and local demand. Setting prices that are realistic helps things sell faster..

Prepare Your Vehicle 

Make sure your car is clean and fix any small problems. First impressions are important, especially when buyers know how much money they have.

Get the paperwork together

Have all relevant paperwork ready, including: 

• Details of the finance agreement
• Service records and MOT certificates
• Insurance documents 
• Documents for registration

Be Patient

It usually takes longer to sell a financed car than it does to sell a regular car. Take this into account when making your plans and be ready for more talks.

Choosing the Best Option for Your Situation

Selling a car that still has money owed on it isn’t always the best choice. Think about your situation very carefully:

• Money problems: Talk to your finance company about your options before you sell.
• Need cash right away: Make sure you know how much it will cost in total.
• Upgrading vehicles: Part-exchange might give you better value overall when you upgrade your car.
• Negative equity situations: Find out how much it really costs to sell the car instead of keeping it.

The choice should be in line with your current situation and your long-term financial goals.

What You Should Do Next

If you want to sell a car with bad credit, you need to plan ahead, be honest about everything, and follow the law. Even though the process is more complicated than selling a car you own, thousands of people do it successfully every year.

The most important thing is to know what you have to do, look at all your options, and pick the one that works best for you. If you want to sell privately, trade with a dealer, or look for other options, make sure you know what they all mean.

When dealing with complicated financial situations, keep in mind that professional help can be very helpful. Our knowledgeable advisors at Business Kiwi can help you understand your options and make smart choices about how to pay for your car. Please get in touch with us today to talk about your situation and the options you have.

Taking action sooner rather than later usually gives you more choices and better results. Don’t let not knowing what to do stop you from looking into real ways to change your car situation when you need to.