Can you sell a car with outstanding finance online? Yes, you can. However, typically, you will need to have paid back at least 50% of the agreed finance instalments – and made a new arrangement with your lender.
These days, it’s a fairly simple process, and you can even sell your car to dealers on finance however, there are a number of elements that you will need to keep in mind to ensure that you act within the law – and drive a good sale home.
Applying for a voluntary termination of your car finance
Though it’s your name written all over the paperwork, when you buy a car on finance, you don’t actually own it until you’ve completed the agreed payments with the lender. Until then, they officially retain ownership of the vehicle. However, so long as you have paid 50% of the agreed finance, you can usually opt for a ‘voluntary termination’ – which will allow you to sell the car.
It is crucial that you pay back the outstanding finance on the car – the lender’s ‘settlement figure’ – and finding out what that is, will usually inform how you choose to sell. Once you know what this figure is, you are free to talk with potential buyers, aware of what to aim for in order to clear the finance – and, hopefully, pocket some cash from the sale. Of course, if selling the car doesn’t cover the settlement figure, you’ll need to make up the shortfall.
Trading in a car with outstanding finance
You can trade in a car with outstanding finance to purchase another car, either using the traditional method or arranged online. Indeed, many car dealers will offer to help clear your finance if you are looking to buy from them. However, watch out, as this is not always free – and many dealerships will want to charge you a processing fee for this service.
Whilst it’s true that you cannot legally sell a car with outstanding finance unless you have first paid off the settlement agreement, most car dealers and car-buying companies will clear any outstanding finance for you before buying your vehicle and will even act on your behalf to transfer the funds.
Giving the car back to the finance company
If you have paid off at least 50% of the total cost (including interest and fees), and you’re keen to stop making payments before your finance agreement ends, you can also opt for a voluntary termination – normally via your lender’s website – and hand back the car to the finance company, who remain the legal owners. This way, you will not make any additional payments.
If you go down this route, you shouldn’t have to pay any interest – but you may be liable for an early exit fee. This will usually be 1% of the settlement agreement, or 0.5%, if there are less than 12 months to be repaid. The process is the same whether you are on Personal Contract Purchase, Hire Purchase, or any other car finance agreement.
Selling to an online car-buying company
If you’re looking for a no-hassle option, you can use one of the many online car-buying groups. To speed this process up, you can get a range of instant offers using Motorway’s comparison tool. All the companies listed on the Motorway website are familiar with the process of buying cars with outstanding finance – and will take care of the administrative side for you.
Typically, you will need to provide the car buyer with clarification of the settlement figure from your finance company. Then, once you have agreed a price for the car, they will contact the lender and pay them directly. Again, if the car’s value is less than the settlement figure, you will need to cover the shortfall.
Selling your financed car privately online
If you’ve paid back 50% of the agreed finance, and opted for a ‘voluntary termination,’ you are also free to sell the car privately via any of the usual online platforms – such as Gumtree, Auto Trader and eBay.
If you’re looking to sell your car, cover the settlement figure, and make a tidy profit into the bargain, then it makes sense to prepare the car in such a way that any potential buyers will find it very hard to ‘chip you down’ on price. Ensure that the car is thoroughly cleaned, aired, and that any minor repairs are taken care of before any buyers look at it – this way you will be able to secure the best possible price.
Getting a new agreement with your lender
If you decide that selling a car with outstanding finance is the right choice for you, and are considering purchasing a new car, for example, it is often a good idea to hand the old car back to the lender – and, assuming you are on good terms, to open an agreement for a new car with them.
If you have agreed to a voluntary termination, this could potentially save you a great deal of time on paperwork – and possibly even money. In order to ensure you are getting favourable rates from your lender, it is always worth doing a small amount of online research and seeing what competitors are offering. Most lenders will match other genuine offers, rather than lose customers.
Reorganising your monthly payments
If the reason you are selling your car is that you are struggling to make your monthly payments, always contact your lender first. Most reputable finance companies will have methods in place to help customers dealing with financial issues – and will be keen to help you restructure your payments so that they are easier for you to manage.