You can’t simply change a car with outstanding finance, you’ll need to settle the loan first. That’s because, with an HP or PCP deal, the lender will be the car’s legal owner until you’ve made all your loan repayments. It’s also against the law to knowingly buy a car with outstanding finance remaining.
What is outstanding finance on a car?
Outstanding finance is the amount still due to pay on a loan. If you want to sell or trade in a car before your agreement comes to its natural end, you’ll need to pay the outstanding finance first. You can do this by requesting a settlement figure from your lender.
What if I can’t afford to pay the outstanding finance?
If you’re struggling to keep up with your car finance payments for any reason, it’s important to contact your lender as soon as possible. They will likely try to help, perhaps by offering you a payment plan or a temporary pause until your finances are back on track.
What are my options if I want to change car, but I have finance outstanding?
There are four main options available to you:
To work out which is the right option for you, it’s worth considering:
- Do you want to keep the car but are struggling with the repayments? Refinance.
- Change car? Settlement.
- Return the car and walk away? Voluntary Termination.
- Have negative equity? Negative Equity Car Finance.
Can you switch a car finance agreement from one car to another?
Every car finance agreement is tailored to you and your car, which is why it’s not usually possible to simply switch it from one vehicle to another. You’ll need to end your agreement first.
Can I end my PCP agreement early?
It’s possible to bring your PCP agreement to an end early but keep in mind that you’ll need to pay the balloon payment if you want to settle your finance and become the car’s legal owner. This can be costly and could leave you running the risk of ending up in negative equity. If you could just hold out until the agreement comes to its natural end, you can choose to hand it back or trade it in instead.
Can I sell a car with outstanding finance?
If you’ve got a car on an HP or PCP finance agreement, you won’t be its legal owner until the loan term ends and you’ve made all the required payments (including the balloon payment in a PCP).
As you don’t own the car, you can’t sell it.
Can I part exchange a car with outstanding finance?
If you’ve fallen in love with a new model, the dealership might be able to help you settle the outstanding finance. It all depends on whether you have positive or negative equity.
- Step 1 – Request a settlement figure from your lender.
- Step 2 – Ask the dealership to value your car.
- Step 3 – If the valuation is higher than the settlement figure, the dealership can usually deal directly with your lender. Any extra money can be used as a deposit in your new deal.
- Step 4 – If the valuation is lower than the settlement figure, you’ll likely need to pay the difference for the dealership to accept the trade.
What happens if I buy a car with outstanding finance?
If you knowingly buy a car with outstanding finance, you could be at risk of having the car repossessed. You may also be found liable to pay the remaining debt, even if the original loan isn’t in your name.
If you bought a car with outstanding finance in good faith, you may be able to keep it. The lender must prove you knew it still had payments outstanding when you bought it.
However, you can protect yourself – and save yourself a lot of trouble – by running an HPI check before you buy. This will let you know whether the car has finance outstanding, if it’s been stolen, or if there are any other issues with your new wheels.
H2: Is it illegal to buy a car with outstanding finance?
Under the Hire Purchase Act 1964, if you buy a car with outstanding finance, you’ll receive a “good title”. This means you purchased it in good faith, believing that the seller has the right to sell it. However, there’s no guarantee that you won’t face pressure from the lender to pay the outstanding finance or have the car repossessed.