Can You Sell a Car With Outstanding Finance?

Buying a car on finance is a great option for a plethora of reasons, but most will agree that the biggest factor is that it allows you to spread the cost of a vehicle across several years rather than parting with a large sum of cash in one go.

You have plenty of flexibility to budget in advance and control how long you want the agreement to last, your ideal monthly payment and any modifications or extras that come with the vehicle.

Over 90% of new cars are bought using finance because of the number of positives that come with doing so. It's also a great way to increase your credit score, as you consistently demonstrate you can make fixed monthly repayments on time.

Do you have a car on finance and would like to reduce your monthly repayments? Sign up with Car Credible today; we could help you save money on your deal.

However, finance can be overcomplicated, and many are unsure they are in a good deal. Not only that, but a finance agreement can last a long time, and circumstances can change, sometimes resulting in you being unable to afford your repayments.

We look at the options available if you wish to sell your car while in an outstanding finance agreement, considering whether you are on a Personal Contract Purchase (PCP) or a Hire Purchase (HP).

How to sell a car on finance

While it can be difficult to sell or get out of an existing car finance deal, it's not impossible. Before you do anything, you should request your early settlement figure from your lender.

The figure you get given is the total amount you will need to pay your lender to get out of your agreement; you can request this at any point in your term.

Of course, the less time you've been in your contract, the more your early settlement figure will be, and vice versa. Once you have received it, it will typically only last for 14 days before it needs to be requested again due to depreciation and repayments you make.

If you are in a PCP or HP agreement, you can't sell your car privately while in the existing contract because the vehicle does not belong to you. It belongs to the lender until you have made all your repayments (and the balloon payment if in a PCP).

If you pay off your early settlement figure, the car will belong to you, and you will have the freedom to do with it what you will. If you do try to sell your vehicle while still in your legally binding finance agreement, you could get sued by the lender.

Can you sell a car on PCP?

On a PCP, if you have paid off over 50% of the finance total owed, including fees and balloon payment, you can settle your loan and exit the contract early, also known as being in a positive equity position.

However, because there will be a final balloon payment within the finance agreement, it's unlikely that you would have paid off over 50% of the total loan by the halfway point of your deal. It will probably be at least two-thirds of the way in before you're over halfway.

If your car is worth less than what you still owe the lender but are desperate to get out of the agreement, it is still possible. However, you will have to make up any difference owed to the lender.

If your car is worth more than you owe the finance company, you will be free to settle the contract and exit early, but you won't get any refund for the amount you have overpaid. 

Can you sell a car on HP?

Like with PCP, on an HP, you can't sell or make any decisions on the future of the car until you have made all of your repayments to the lender and the car is officially yours.

You can request your early settlement figure and get out of your deal early if you are in a positive equity position. If you're not quite there, you can either wait until you get there or make up the difference yourself.

If you are in any finance agreement and attempt to leave within six months, it could harm your credit score and future borrowing power. The same can be said if, at any point in your deal, you fail to make a repayment on time. 

Can you part-exchange your car on finance?

Part-exchanging is a great way to get out of your existing finance deal if you are looking to get into a new car or potentially lower your monthly payments and/or APR.

Like getting out of your deal to sell your car, you'll need to request your early settlement figure and identify whether you are in a positive or negative equity position.

From here, if you're in a negative position, you will need to make up the difference and will likely not be beneficial to you as you'll have no equity to use to put towards a deposit on your next vehicle.

Whereas if you are in a positive position, you can use that as collateral on your new car, which should hopefully help to reduce your monthly repayments.