If you bought a used vehicle with some form of finance such as Hire Purchase (HP) or a Personal Contract Plan (PCP), during the term of your agreement you may wish to sell the vehicle.
This might be in order to change your car, or because you no longer require one. Either way, you may want to know how to sell a used car with a loan.
If you’ve bought the car with finance, you don’t own the title to the vehicle, so it’s not yours to sell and any attempt to do this without the knowledge of your lender is illegal.
Your bank, finance company, lender or dealership will sometimes be prepared to allow you to sell the vehicle on the understanding that you pay back what is left on your finance agreement out of the money acquired from the sale, but this is not always the case and may come with additional costs.
Fees for settling your finance early
Always check your original finance contract first for any fees payable for exiting your agreement early and clauses regarding voluntary termination. Even with a fee to pay off early, this may still balance out cost-wise, as by ending your agreement earlier, you will not be paying the interest each month.
Selling a used car with Hire Purchase finance
You can’t sell a vehicle that has outstanding payments on a HP finance agreement because the lender is legally the owner of the car up until full settlement of the finance.
In order to sell on a car that has outstanding payments on HP finance, you must end your agreement early. You can do this by contacting your lender and requesting the settlement figure for your outstanding finance.
After receiving this settlement figure, there will be a set term in which you must pay fully. Once you’ve paid everything off you will be the owner of the vehicle and able to sell it.
Selling a used car with Personal Contract Plan finance
Until you’ve completed all your payments on your PCP agreement or paid back in full your outstanding finance, you will be unable to sell the vehicle to interested car buyers.
As with an HP agreement, you can contact your lender for a settlement figure but remember that because you’ve only been paying back a small portion of the cars value, this sum of money to repay will be higher than it would be in other forms of finance.
If you end a PCP agreement, in order to make the vehicle yours you’ll need to pay a “balloon payment”. This is a sum agreed at the onset of your contract, indicative of what your lender believes your car will be worth at the end of your agreement.
Selling your used car with finance because you no longer need it
If you’re looking to sell your car because you don’t require it any more, you do have the option of returning the vehicle to the lender if you’ve paid back half of your total finance.
A little-known consumer law states that if you’ve made repayments equal to half of your total outstanding loan, you can return the car to your lender and walk away from your finance agreement.
As with ending any finance agreement at an earlier date, there may be additional fees to pay if stated in your contract. For example, if you’ve overstepped your agreed mileage in a PCP agreement, you will have to pay it back at 7 to 10 pence per mile over your limit. This might not sound like much if it’s just a few miles, but it can soon add up.