Can I sell a car with outstanding finance?
Let’s start with the good news: you can. If you want to sell a car with outstanding Personal Contract Purchase (PCP) or Hire Purchase (HP) finance, there are ways to do it. But there is less good news: compared with the much more streamlined process of selling a car that you own outright, there are a few hoops to jump through. Thankfully it’s not that tricky, as our guide here will explain. Follow our steps and you can shift your motor and close the contract.
How do I sell a financed car?
Get in touch with your finance provider and let it know you want to sell the car. It's still legally the owner, after all, so you’ll need permission.
Ask for a settlement figure. If you own more than 50% of the car already (because you’ve paid off more than half of the original agreement), you can normally hand the car back and have the contract closed under 'voluntary termination'.
If you’ve not yet paid off 50% of the original agreement value, speak to your provider. You may be able to hand the vehicle back for them to sell on, and they will credit that back against the amount you need to pay. You'll have to carry on making your monthly payments until you have paid back 50% of the total agreement, however. The sooner you hand it back, the higher the car is likely to be valued, but bear in mind this may mean you are making payments for a car you don’t have the benefit of using.
Can I get money back if I sell my financed car?
It is possible, yes. The first way is if you buy the car outright, and then sell it on (as the outright owner you could now choose where to sell it) for a price that exceeds the value you spent on it.
This isn’t always possible, although a well-looked-after car can sometimes fetch a surprisingly handsome sum on the used market, especially if it’s a desirable model.
If you can’t afford to buy the car outright, you can take out a loan to raise the funds. But while this will enable you to sell the car as the outright owner, and potentially receive more than you paid for it, you will, of course, be in debt to the loan lender.
If your monthly rates are lower than your HP/PCP agreement, this may be a desirable route – but you’ll still be tied into a contract that you owe money to.
Can I part exchange a financed car?
If you’re looking to replace a financed car with something else, you can part-exchange a financed vehicle. The process is similar to that of selling the car:
Inform the finance company that you would like to sell your car. It still owns the car as part of the agreement.
Request a settlement figure.
Ask the company you intend to finance your next car from how much they will pay you for the car you’re trying to part exchange.
If they offer you a figure that exceeds your outstanding finance, you’ll be in so-called positive equity, the value of which can be used towards your next car. For example, if your car is valued at £10,000 and the outstanding finance is £1,000, you will have an extra £9,000 to go towards the next vehicle.
Alternatively, you’ll be in negative equity when the amount owed to the finance company is more than the sum you’ve been offered for the car. For example, your car is valued at £10,000 but you owe £10,500. You can either pay off the remaining amount separately (in this example case, £500), or the company you are financing your next car off may allow you to add the sum to the PCP or HP agreement you’re negotiating.