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Car finance ›
Can you sell a car with outstanding finance?
Updated: Tuesday, 16 January 2024
If you purchased your car on finance and still have money left to repay, deciding to sell it isn’t as straightforward as finding a buyer and transferring ownership.
In this guide, we’ll explore whether you can sell a financed car and explain how different finance agreements may affect this in practice. Then, we’ll look at your options for changing your car when you still have outstanding finance on your current vehicle.
Key terms relating to selling a car with outstanding finance
To navigate the complexities of trying to sell a car bought on finance, it helps to understand certain key terms first.
1. Voluntary termination
If your circumstances change during your car finance agreement, you might need to end your agreement early. Under the Consumer Credit Act 1974, you can voluntarily terminate or end your car finance agreement early, provided you meet the relevant criteria.
It’s important that you research what voluntary termination means before deciding to do so. For more information, read our guide on how voluntary termination of car finance works.
2. Early Settlement Figure
Another way to end a car finance agreement is by early settlement. Car finance providers will require you to pay an Early Settlement Figure if you request to pay off your outstanding balance early.
They are usually valid for 28 days, after which point you will need to request a new one. Find out how finance providers calculate your Early Settlement Figure with our guide.
3. Negative equity
If you have a car finance agreement and the amount you owe exceeds how much it’s worth, you will have negative equity.
For example, if you want to part-exchange or sell your vehicle, you will need to pay off your existing finance through an early settlement. Say your early settlement figure is £10,000 but your car is worth £8,000. There is £2,000 worth of negative equity. This means you would need to find £2,000 to settle your agreement and then you would be able to sell your vehicle.
As you make monthly payments, you reduce the negative equity and could end up with positive equity, where you have the amount remaining on the finance agreement is less than the car’s current market value.
4. Registered keeper
If you have a Conditional Sale (CS) or Hire Purchase (HP) agreement, you’ll be the car’s registered keeper, not the owner. This is because the finance company is the car’s legal owner until you make the final payment, and, in the case of HP agreements, pay the ‘option to purchase’ fee.
With a CS agreement, you automatically own the car once you make your final payment.
The registered keeper of a car is responsible for ensuring the car is taxed, roadworthy, has a valid MOT, and is insured.
Read our blog to find out who is the legal owner of a car on different types of finance.
5. Legal owner
The legal owner of the vehicle is the person or company who gained title to the vehicle at the point of sale. Therefore if you purchased the vehicle under a CS or HP, the finance company will remain the legal owner until the finance balance has been cleared in full. Once the finance is settled, the finance company will transfer title (legal ownership) of the vehicle to you.
If you have a PCH agreement, title will remain at all times with the finance company as there is no option under this type of agreement to purchase the vehicle. At the end of the hire term, the vehicle is then returned to the finance company.
6. Part exchange
In a part exchange deal, you use the value of your current car as part of the payment for your new vehicle. As part of this deal, the seller of your new car essentially buys your old car from you, deducting the value of your old car from your new one.
Find out more about part exchanging a car on finance with help from our guide.
7. Balloon payment
This is the lump sum owed to a lender at the end of a finance agreement, which is a feature of a Personal Contract Purchase (PCP) agreement.
Finance providers calculate the balloon payment at the beginning of your contract, and it remains fixed for the duration of your agreement regardless of whether the car’s market value fluctuates.
Can you sell a car with outstanding Conditional Sale finance?
A Conditional Sale (CS) finance agreement means you will only legally own your car once you’ve made the final payment. Until then, the finance company owns the vehicle, and you are its registered keeper.
Since you don’t legally own the car, you won’t be able to sell it. If you do want to sell a car with outstanding CS finance, you’ll need to contact your finance company and request to settle your car finance agreement early by paying the early settlement figure.
Can you sell a car with outstanding Personal Contract Purchase finance?
If you have a car on Personal Contract Purchase (PCP), you cannot sell it as you are not its legal owner, just the registered keeper. The finance company is the vehicle’s legal owner until you have made all your monthly payments as well as the balloon payment.
To sell a car with outstanding PCP finance, you must contact your finance provider and arrange an early settlement agreement. This figure will include the remaining finance payments and the final balloon payment.
Can you sell a car with outstanding Personal Contract Hire finance?
With a Personal Contract Hire (PCH) agreement, you will never own the car. In a lease agreement, you are essentially renting the car for an agreed period of time.
When the agreement ends, you return the car to the dealership or finance company, and they remain the legal owner throughout.
Since you are only ever the vehicle’s registered keeper, it is not yours to sell. If you want to terminate a PCH finance agreement early, you may be able to do so, but there is usually a fee involved.
What happens when you sell a financed car?
The process of selling a financed vehicle can be confusing, especially if you’ve never had to do it before. You cannot sell a car with outstanding finance until you’ve paid off your agreement.
To make it easier, we’ve summarised the main steps to follow if you want to sell your car:
- Review the terms and conditions of your finance agreement to check if any early exit fees apply.
- Get an up-to-date valuation of your vehicle to work out if your finance agreement is in positive or negative equity. If your car’s market value is £10,000, but you have £12,000 of outstanding finance, you will be in £2,000 of negative equity and will need to make up the difference out of your own pocket.
- Request an Early Settlement Figure (ESF) from your car finance company (by law, your provider must send this to you within 7 working days).
- You can then part-exchange your car and have the dealership pay off your ESF before the validity period expires. Typically, this is after 28 days, but it can vary from lender to lender, so it’s important to check the expiry date detailed in any correspondence you receive. You will need to request a revised settlement figure if you can’t pay by the settlement date.
Alternatives to selling a car on finance
If you no longer wish to continue your car finance agreement, before deciding, review your finance agreement as it should outline the processes and fees involved in ending your agreement. Or, if you are unsure, contact your lender and they will be able to discuss your options.
Voluntary termination of your agreement
This option could be appropriate if you can no longer afford your monthly payments. Depending on the type of finance you have, there may be a fee involved, and you may be charged if there is excessive wear and tear or damage.
If you have already paid off at least 50% of the total finance amount, you can give your car back to the finance company using a process known as voluntary termination.
Continuing with your monthly payments
Depending on how much is left to pay on your finance agreement, the most suitable option may be to continue making monthly payments until the agreement term ends.
For example, if you are on a Conditional Sale agreement and will own the car at the end of the finance contract, it may be easier to keep up with the monthly repayments and sell the car once you become the legal owner.
More from Moneybarn
If you want to purchase your next car, van, or motorbike on finance, we could help. We specialise in providing vehicle finance for people with poor credit history or whose financial circumstances mean lenders have refused their past applications.
Discover how our application process works, and when you’re ready, apply online and you’ll get an immediate decision as to whether we can help you onto a better road ahead.
Representative 30.5% APR.
FAQs about selling a car with outstanding finance
Is it against the law to sell a car I purchased on finance?
Yes, selling a car while still on a finance plan is against the law since you are not the vehicle’s legal owner until the end of your contract. Depending on the type of finance you have, you will typically be the registered keeper until the agreement is settled. The registered keeper and legal owner are two separate aspects, and you can only sell the vehicle once you are the legal owner. This is only achieved once the finance agreement has been settled in full.
Can you sell a car on finance if you purchased it with a personal loan?
If you buy a car with a personal loan, you will own the car outright. This means you can sell the vehicle, but you will still need to pay the personal loan off. A personal loan isn’t secured against the vehicle itself, but you will still need to make the monthly payments, regardless of what you choose to do with the vehicle.
What happens if I buy a car with outstanding finance?
Always do thorough research before buying a vehicle from a private seller to ensure they are doing everything in good faith. There are lots of things to check when buying a car, but thankfully there are online tools that can confirm that the car you’re interested in doesn’t have outstanding finance.
If you discover that a vehicle you purchased has outstanding finance, you should contact the finance company immediately who can help you resolve the situation.
Will I pay an early exit fee to sell a car on finance?
Lenders may charge an early exit fee if you want to end your agreement early, so check your contract and speak to your lender. The amount charged and your withdrawal rights may differ depending on several factors, including the lender you have an agreement with and the type of car finance you have.
If you purchased your car on finance and still have money left to repay, deciding to sell it isn’t as straightforward as finding a buyer and transferring ownership.
In this guide, we’ll explore whether you can sell a financed car and explain how different finance agreements may affect this in practice. Then, we’ll look at your options for changing your car when you still have outstanding finance on your current vehicle.
Key terms relating to selling a car with outstanding finance
To navigate the complexities of trying to sell a car bought on finance, it helps to understand certain key terms first.
1. Voluntary termination
If your circumstances change during your car finance agreement, you might need to end your agreement early. Under the Consumer Credit Act 1974, you can voluntarily terminate or end your car finance agreement early, provided you meet the relevant criteria.
It’s important that you research what voluntary termination means before deciding to do so. For more information, read our guide on how voluntary termination of car finance works.
2. Early Settlement Figure
Another way to end a car finance agreement is by early settlement. Car finance providers will require you to pay an Early Settlement Figure if you request to pay off your outstanding balance early.
They are usually valid for 28 days, after which point you will need to request a new one. Find out how finance providers calculate your Early Settlement Figure with our guide.
3. Negative equity
If you have a car finance agreement and the amount you owe exceeds how much it’s worth, you will have negative equity.
For example, if you want to part-exchange or sell your vehicle, you will need to pay off your existing finance through an early settlement. Say your early settlement figure is £10,000 but your car is worth £8,000. There is £2,000 worth of negative equity. This means you would need to find £2,000 to settle your agreement and then you would be able to sell your vehicle.
As you make monthly payments, you reduce the negative equity and could end up with positive equity, where you have the amount remaining on the finance agreement is less than the car’s current market value.
4. Registered keeper
If you have a Conditional Sale (CS) or Hire Purchase (HP) agreement, you’ll be the car’s registered keeper, not the owner. This is because the finance company is the car’s legal owner until you make the final payment, and, in the case of HP agreements, pay the ‘option to purchase’ fee.
With a CS agreement, you automatically own the car once you make your final payment.
The registered keeper of a car is responsible for ensuring the car is taxed, roadworthy, has a valid MOT, and is insured.
Read our blog to find out who is the legal owner of a car on different types of finance.
5. Legal owner
The legal owner of the vehicle is the person or company who gained title to the vehicle at the point of sale. Therefore if you purchased the vehicle under a CS or HP, the finance company will remain the legal owner until the finance balance has been cleared in full. Once the finance is settled, the finance company will transfer title (legal ownership) of the vehicle to you.
If you have a PCH agreement, title will remain at all times with the finance company as there is no option under this type of agreement to purchase the vehicle. At the end of the hire term, the vehicle is then returned to the finance company.
6. Part exchange
In a part exchange deal, you use the value of your current car as part of the payment for your new vehicle. As part of this deal, the seller of your new car essentially buys your old car from you, deducting the value of your old car from your new one.
Find out more about part exchanging a car on finance with help from our guide.
7. Balloon payment
This is the lump sum owed to a lender at the end of a finance agreement, which is a feature of a Personal Contract Purchase (PCP) agreement.
Finance providers calculate the balloon payment at the beginning of your contract, and it remains fixed for the duration of your agreement regardless of whether the car’s market value fluctuates.
Can you sell a car with outstanding Conditional Sale finance?
A Conditional Sale (CS) finance agreement means you will only legally own your car once you’ve made the final payment. Until then, the finance company owns the vehicle, and you are its registered keeper.
Since you don’t legally own the car, you won’t be able to sell it. If you do want to sell a car with outstanding CS finance, you’ll need to contact your finance company and request to settle your car finance agreement early by paying the early settlement figure.
Can you sell a car with outstanding Personal Contract Purchase finance?
If you have a car on Personal Contract Purchase (PCP), you cannot sell it as you are not its legal owner, just the registered keeper. The finance company is the vehicle’s legal owner until you have made all your monthly payments as well as the balloon payment.
To sell a car with outstanding PCP finance, you must contact your finance provider and arrange an early settlement agreement. This figure will include the remaining finance payments and the final balloon payment.
Can you sell a car with outstanding Personal Contract Hire finance?
With a Personal Contract Hire (PCH) agreement, you will never own the car. In a lease agreement, you are essentially renting the car for an agreed period of time.
When the agreement ends, you return the car to the dealership or finance company, and they remain the legal owner throughout.
Since you are only ever the vehicle’s registered keeper, it is not yours to sell. If you want to terminate a PCH finance agreement early, you may be able to do so, but there is usually a fee involved.
What happens when you sell a financed car?
The process of selling a financed vehicle can be confusing, especially if you’ve never had to do it before. You cannot sell a car with outstanding finance until you’ve paid off your agreement.
To make it easier, we’ve summarised the main steps to follow if you want to sell your car:
- Review the terms and conditions of your finance agreement to check if any early exit fees apply.
- Get an up-to-date valuation of your vehicle to work out if your finance agreement is in positive or negative equity. If your car’s market value is £10,000, but you have £12,000 of outstanding finance, you will be in £2,000 of negative equity and will need to make up the difference out of your own pocket.
- Request an Early Settlement Figure (ESF) from your car finance company (by law, your provider must send this to you within 7 working days).
- You can then part-exchange your car and have the dealership pay off your ESF before the validity period expires. Typically, this is after 28 days, but it can vary from lender to lender, so it’s important to check the expiry date detailed in any correspondence you receive. You will need to request a revised settlement figure if you can’t pay by the settlement date.
Alternatives to selling a car on finance
If you no longer wish to continue your car finance agreement, before deciding, review your finance agreement as it should outline the processes and fees involved in ending your agreement. Or, if you are unsure, contact your lender and they will be able to discuss your options.
Voluntary termination of your agreement
This option could be appropriate if you can no longer afford your monthly payments. Depending on the type of finance you have, there may be a fee involved, and you may be charged if there is excessive wear and tear or damage.
If you have already paid off at least 50% of the total finance amount, you can give your car back to the finance company using a process known as voluntary termination.
Continuing with your monthly payments
Depending on how much is left to pay on your finance agreement, the most suitable option may be to continue making monthly payments until the agreement term ends.
For example, if you are on a Conditional Sale agreement and will own the car at the end of the finance contract, it may be easier to keep up with the monthly repayments and sell the car once you become the legal owner.
More from Moneybarn
If you want to purchase your next car, van, or motorbike on finance, we could help. We specialise in providing vehicle finance for people with poor credit history or whose financial circumstances mean lenders have refused their past applications.
Discover how our application process works, and when you’re ready, apply online and you’ll get an immediate decision as to whether we can help you onto a better road ahead.
Representative 30.5% APR.
FAQs about selling a car with outstanding finance
Is it against the law to sell a car I purchased on finance?
Yes, selling a car while still on a finance plan is against the law since you are not the vehicle’s legal owner until the end of your contract. Depending on the type of finance you have, you will typically be the registered keeper until the agreement is settled. The registered keeper and legal owner are two separate aspects, and you can only sell the vehicle once you are the legal owner. This is only achieved once the finance agreement has been settled in full.
Can you sell a car on finance if you purchased it with a personal loan?
If you buy a car with a personal loan, you will own the car outright. This means you can sell the vehicle, but you will still need to pay the personal loan off. A personal loan isn’t secured against the vehicle itself, but you will still need to make the monthly payments, regardless of what you choose to do with the vehicle.
What happens if I buy a car with outstanding finance?
Always do thorough research before buying a vehicle from a private seller to ensure they are doing everything in good faith. There are lots of things to check when buying a car, but thankfully there are online tools that can confirm that the car you’re interested in doesn’t have outstanding finance.
If you discover that a vehicle you purchased has outstanding finance, you should contact the finance company immediately who can help you resolve the situation.
Will I pay an early exit fee to sell a car on finance?
Lenders may charge an early exit fee if you want to end your agreement early, so check your contract and speak to your lender. The amount charged and your withdrawal rights may differ depending on several factors, including the lender you have an agreement with and the type of car finance you have.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
