This article originally appeared on Evans Halshaw.
So, you have a car on finance, however, you would like to upgrade early or you're struggling financially to pay the monthly payments. Finance agreements are wordy documents that can be very confusing, with the use of financial jargon. But don't give up hope as there are ways you can settle the outstanding finance to enable you to sell the car and we can help you with this process.
We are happy to buy your car even if you have outstanding finance and we will take away any hassle. Our buying assistants can arrange the settlement of your current agreement and will guide you through the process. The settlement amount will be deducted from the amount paid to you for the car. For advice, call us direct on 03330 609 680.
How Do I Sell a Car with Outstanding Finance?
Before you can do anything, whether you have a car on Hire Purchase (HP) or Personal Contract Purchase (PCP), you will need to find out your car's settlement figure in order to settle your contract early. This figure is the total amount you will need to pay your lender to terminate your contract to end the finance agreement and will include any fees. Lenders are required, by law, to provide the settlement figure within 12 days of the request and you should request this figure in writing.
With HP or PCP finance agreements, you are unable to sell the car privately whilst you have outstanding finance as the lender is the owner of the car until you have repaid the finance agreement or paid the settlement figure in full. It's actually illegal to sell the vehicle to a private buyer without informing them of the outstanding finance and can result in you being sued for fraud.
If you have a car on hire purchase (HP) finance, the lender remains the owner until the finance is settled or all payments have been made. Once you have obtained the settlement figure and paid it off, within a set period of time, the car will be yours to sell.
Finance agreements vary significantly, therefore it is important to thoroughly check your paperwork to find out the terms and conditions of your particular contract. If you try to leave your agreement earlier than six months this may have a negative impact on your credit rating, which can make obtaining credit difficult in the future.
Personal Contract Purchase (PCP)
If you have a car on personal contract purchase (PCP) you can end the contract early through settling your outstanding finance amount as long as you've paid over half of the total finance amount, including interest and fees, to the lender. Due to the final balloon payment, it is unlikely that you will have paid 50% by the mid-point of the contract.
Don't worry if you haven't paid over half, you can still end the finance agreement early, however, you will need to pay the difference. If you have paid significantly more than half you won't receive a refund.
You are unable to sell the car until you have repaid the PCP agreement or paid a settlement figure. Like with HP, the settlement figure may include additional charges such as an early exit fee. Another option is paying off the agreement early and once the agreement figure is paid the car will be yours to sell.
Swap or Part Exchange Your Car to Settle the Finance
Swapping or part exchanging your car is a simple way of settling the finance on your existing car and is a great option if you are wanting to upgrade your car early. Evans Halshaw is able to help you with this process.
You will need to get a valuation for you car which is simple with our Sell Your Car tool. Once you have the valuation figure you will be able to work our whether you are in positive or negative equity by subtracting the finance settlement figure from your car's valuation price. Basically, if this equals a positive figure you're in positive equity and can use this amount of money as a part exchange for your next car, however, if the figure is negative you're in negative equity and will need to pay that figure on top of your new car's price.
You have various options available for getting out of your finance agreement early, whether you decide to sell your car or return it to the lender, Car Store can help.