The good news is that you absolutely can sell a car that’s still on finance. However, there are a few key things you should know before you start the process. For example, if your car has outstanding finance on it and you don’t tell the buyer, that’s illegal.
This guide will comprehensively break down how to sell a car that is on finance based on your agreement type. We’ll also provide helpful advice on questions about credit score and whether to sell via a dealer or privately.
Can you sell a car on finance?
You can sell a car on finance, but it depends on what type of finance agreement you’re on.
If you’re on personal contract purchase (PCP) or hire purchase (HP) finance, or if you got a personal loan for the vehicle, you can sell the car.
You can’t sell a car if you have a personal contract hire (PCH) finance agreement.
Remember, for both PCP and HP finance, the lender remains the legal owner until the finance is settled. You cannot legally sell a car that’s been financed with PCP or HP without having formally notified your lender and followed the correct procedure.
Legally, if you sell the car without having followed protocol, it’s considered fraud – and you’ll face the consequences of breaking the law.
Understanding your car finance agreement
Personal contract purchase (PCP)
With PCP finance, you don’t own the car until the agreement is settled in full and you’ve paid the optional balloon payment.
Hire purchase (HP)
Unlike PCP, there’s no optional balloon payment at the end of an HP agreement. You’ll be the legal owner of the vehicle once you’ve made your final payment.
Personal contract hire (PCH)
PCH finance is essentially a long-term rental agreement. As a result, you cannot sell a car financed on PCH.
Personal loan
You’ll own the vehicle outright from day one if you financed it with a personal loan and can sell it at your discretion.
How to sell a car with PCP Finance
The lender remains the legal owner of a vehicle on PCP finance until the last monthly repayment is made – but you may be able to sell in the following ways:
Option 1: Voluntary termination
If you’ve paid off 50% of the ‘total amount payable’ on a PCP finance agreement – including fees and interest – you may be eligible for voluntary termination.
Provided you’ve followed proper procedure, applying for voluntary termination generally shouldn’t negatively impact your credit score. That said, it most likely will appear on your credit report. As long as you’ve followed the correct procedure and met all your financial obligations, you shouldn’t have experienced any negative effects.
Option 2: Pay off the settlement figure
Contact your finance company and advise them of your plans to sell your car. They should be able to provide a settlement figure. This is the amount you can pay to end your agreement early. Depending on the lender, you may also face an ‘early exit fee’.
In certain cases, your settlement figure may be less overall than it would cost to continue your monthly repayments. In this case, it could be financially savvy to pay this off early.
Plus, once you’ve paid the settlement figure, you’ll become the car’s legal owner. You could then sell the vehicle privately or trade it in for an upgrade after clearing your overall balance.
Option 3: Part exchange through a dealer
When you part exchange, you use the value of your current car to offset the cost of your next one.
A part exchange is a popular choice for drivers looking to upgrade their existing vehicle or switch to an alternative financing agreement.
During the part exchange process, you may also be able to negotiate with the dealer to settle any outstanding finance for you as part of the deal.
How to sell a car with HP finance
As with PCP finance, on HP, the lender remains the legal owner of the vehicle until the final payment is made.
That said, there are ways to sell a car that’s on HP finance.
Option 1: Voluntary termination
Your HP finance agreement may include a voluntary termination clause. This is usually only offered if you’ve paid off at least 50% of the vehicle’s total cost, including fees and interest rates.
It may be easier to secure voluntary termination on HP finance compared to PCP.
Option 2: Early settlement
As with PCP finance, you can request the settlement figure from your lender. Once this is paid off, you’re the car’s legal owner, and can sell it at your leisure.
Option 3: Part exchange through a dealer
With HP finance, you can either part exchange at the end of your agreement, or once half the total has been paid.
As with PCP, dealers will often agree to handle this process, even if there’s outstanding finance owed.
Can you sell a car on PCH?
We’ve run through how to sell a car that is on finance, but what about leasing? As you never own the car outright, you cannot sell a car on PCH finance – it must always be returned to the finance company.
Unlike PCP and HP, there’s no option for voluntary termination on PCH finance.
It is possible to end a PCH agreement early, but you may face a substantial early termination fee. You’ll also likely need to settle any outstanding rentals or other financial obligations.
Selling a car financed by a personal loan
If you’ve financed your car with a personal loan, you’re the vehicle’s legal owner. As such, you can sell it at any time.
Remember to make any repayments that are still outstanding on the loan, even after the sale has gone through.
You’ll need certain paperwork to sell your car. This includes everything from the V5C logbook, MOT certificate (if relevant), service history and proof of ownership. You’ll also need to notify the DVLA.
Selling a financed car privately vs. to a dealer
If you’re wondering how to sell a car you are financing, there are two main ways – privately or through a dealer.
There are pros and cons to both, which we’ll outline below.
Privately
Selling privately can be more time-consuming, and you’ll need to be organised with paperwork. Plus, it will be up to you to settle any outstanding finance that remains on the vehicle before you sell it.
However, you may get a better price if you sell the car privately compared to doing so via a dealer.
Dealership
Many dealers can handle any outstanding finance on a car if you choose to trade it in. They’ll simplify the process for you by handling any paperwork, saving you time and effort.
As a result, you’ll likely get a lower overall price compared to a private sale.
Remember to compare quotes from different dealers to ensure you’re getting the best possible price.
Will selling a financed car affect my credit score?
Provided you follow the correct procedure for selling a financed car, your credit score shouldn’t be negatively affected.
In fact, if you show no missed payments and an ending that’s been mutually agreed by both yourself and the lender, that can be proof of your responsibility as a borrower. This kind of good finance behaviour can then improve your credit score over time.
Any unpaid car finance will leave a negative mark on your credit score, making future loans harder to secure at favourable rates.
How My Car Credit can help
At My Car Credit, we’re committed to helping customers looking to transition out of one finance deal into a new one.
Our expert team can offer guidance and support throughout the process, ensuring you benefit from suitable finance for your needs and profile.
If you’re looking to switch to an alternative finance agreement, use our online form to check your car finance eligibility. Any initial search won’t leave a mark on your credit report, and you’ll receive a no-obligation quote in minutes.
FAQs
Can I trade in a car that’s on finance?
Provided you’ve settled any outstanding balance on your existing finance agreement and have followed proper procedure with the lender, you can trade in a car that’s on finance.
What happens if I sell a car with outstanding finance?
To sell a car with outstanding finance, you’ll need to pay the lender’s settlement fee. Until this is paid in full, the car remains the property of the lender. It’s illegal to sell a car with outstanding finance without notifying the lender.
