There are many reasons why you might find yourself wanting to sell your car before you’ve finished paying off any outstanding finance. Perhaps your circumstances have changed and you need to get rid, even though you're still making finance repayments.
It's not impossible to sell your car that is on finance, it might just be a little bit trickier than normal, but it is doable.
How can you sell a car with finance on it?
Technically, you can't sell your car if you have outstanding finance on it. In fact, it's actually illegal to sell a car on finance without telling the buyer that you still owe money on it and without paying off the debt, Nerd Wallet reports. The reason for that is that you don't own the vehicle until you've made all of your payments. So if you sell your car and haven't informed your buyer, you will have committed fraud and could be prosecuted. You can only sell your car once you have finished your contract with your finance company and then you can do what you like with your vehicle as the legal owner.
So if you do plan on selling the vehicle that you have on finance, the best thing to do would be to contact your finance company to discuss an early settlement figure.
According to Head of Motor Finance, Adrian Dally, at the Finance and Leasing Association (FLA), says, “Asking your lender for information does not commit you to settle in part or in full. However, once you have made the payment to settle the loan, you cannot later change your mind.”
If you failed to pay by the settlement date, you would have to ask for a new settlement figure from your finance company. Once you've paid off the outstanding balance early, you'll have full ownership of the car and be done with your finance agreement.
What happens if I sell a car with outstanding finance?
It is possible to sell a financed car even if you're not the legal owner, but brace yourself for some legal trouble.
If you sell your car that you're currently paying for on finance, and you put the new owner of the car on the V5, in the dealer's eyes you will still be the legal owner. When the next payment is due, the dealer will contact the new owner first and then you. If there are issues with the payment being made, the finance provider could take you to court if you don’t settle the debt and fees, and/or for breaking the terms of your contract. Your new buyer could also be affected too, and their new vehicle could end up being repossessed too.
Trading a car with outstanding finance
If you're looking at getting rid of your car finance because your financial circumstances have changed, then swapping or trading in your car is a simple way of settling your car finance.
One option is that you could visit a dealership, and as long as your settlement value is less than the total value of the car, you can put the difference towards a deposit for a new car says the Money Expert. You'll be able to see what the value of the new vehicle is and get yourself a quote for a new finance deal to see how much you'll need to pay each month.
Handing your car back to the dealer
Did you know that you can return your financed car back to the dealership if you've paid off less than half of your agreement's total cost? That is provided of course that you repay the remaining instalments, so you've paid for half of the car's value.
If it turns out that you've paid more than half of the car's total cost, the likely hood is that you may not be able to return the car.
Will a new car dealership settle my outstanding finance?
If you've come to the decision that you want to sell your car to a dealership, but you still have outstanding finance, that's ok. All the dealer will require from you is an up-to-date settlement figure for your car finance, it's that simple.
Depending on the dealership that you choose, they may pay the settlement figure directly to your lender if it's less than the value of the car. From there, they will either pay you the surplus or you could use it for a deposit on a new vehicle if you wanted too, the choice is yours.
Can I sell a car I'm paying off with a personal loan?
If you bought a car with a loan rather than a finance plan, you own the car. Your lender won’t care what you do with the vehicle so long as you keep up your repayments. This means that the car is your property from day one, and you can do what you want with it, so you can sell a car bought in this way without any trouble. Just remember that, even when you’ve sold the car, you still have to finish paying off the loan.
If you want to see how much you could get for your car, get a quote from Jamjar, the car buying comparison site. We compare expert car buyers around the UK and can get you a great deal that will also allow you to pay off outstanding finance.
Alternatives to Selling
If you're sitting on the fence about whether or not to sell your financed car, you don't have to sell it before you've fully repaid the loan. You have several other options available instead:
Keep paying: if you're close to the end of your car finance contract, it might make sense to just carry on with it until you reach the end of your contract. Once you've finished paying, the car will then be legally yours to do what you want with it. Depending on your interest rate, doing this may be a cheaper option than paying it off early.
Return the car: this might be the perfect option for you if you're in negative equity. If this is you and you find yourself in this situation, then you might be better off by just continuing with the monthly instalments, and then returning the car back to where it came from at the end of your contract.
Cancel your car finance contract: you can voluntarily return your car if you've paid more than 50% of the total amount of your car finance agreement.
It's up to you to decide what's best for you and your circumstances and there's no doubt that each of us will be different and we will have our reasons for which ever option we decide to choose.