Can I sell a financed car? Everything you need to know

Paying in cash is always an option when buying a car, but financing is becoming an increasingly common way for people to park a new set of wheels on their drive. 

Selling a financed car isn’t always as simple as selling a car you bought outright in cash.

If you looking to sell your car, why not sell with carwow? Just click the green button below to find out more, or get a valuation on your current car.

Can I sell a financed car?

You can sell a financed car, but you must settle the outstanding finance with your finance company first. This means you have to first pay off the total finance amount (including interest), minus the deposit and any repayments you’ve already made. This amount is known as the settlement figure.

If you choose to sell your car to a dealer, they’ll often offer to pay this settlement figure as part of the purchase.

If the sale price is greater than the settlement figure, the dealer will pay you the difference. If the car is worth less than this amount, you’ll need to pay them, however.

You can choose to sell your car privately instead, but you must settle the outstanding finance yourself first. It is illegal to sell a car with outstanding finance to a private buyer without making them aware of this fact.

The exact details of settling your car finance will depend on the terms of your finance contract.

There are four main car financing options:

• Personal contract purchase (PCP)
• Hire purchase (HP)
• Personal contract hire (PCH)
• Personal loan (such as from a bank)

Personal contract purchase (PCP) explained

PCP finance requires that you pay an initial deposit and a series of monthly payments for an agreed period (usually between two to four years). At the end of your finance term, you won’t own the car. You can choose to return it car to the dealer with nothing left to pay, take out a new finance agreement on a different car, or pay a lump sum to own the car outright.

This lump sum (sometimes called the optional final payment or ‘balloon’ payment) will be set out in your original finance agreement.

The amount is based on the car’s Guaranteed Minimum Future Value (GMFV) – a figure calculated using the original deposit, the sum of all the finance payments you’ll make, and how many miles your agreement allows you to drive.

If you choose to return the car, you may be charged additional fees if it has any damage beyond normal wear-and-tear, or if it has more miles on it than set out in your finance agreement.

Can I sell a car on PCP finance?

Short answer: Yes, but you must settle any outstanding finance first.

If you choose to sell to a private buyer, you should contact your finance company to agree on a settlement figure. This will need to be paid before you sell the car. With PCP finance, the settlement amount includes any remaining finance payments, interest and the final ‘balloon payment’.

If you’d rather sell to a dealer, you must still agree on a settlement figure with your finance company. Many dealerships will pay this settlement figure as part of the purchase.

How to end a PCP agreement early

You can choose to end your PCP finance term early, providing you’ve paid back more than 50% of the total finance amount. This is called Voluntary Termination.

The total finance amount includes the deposit, all the monthly finance payments, interest and the final balloon payment. This means that you likely won’t pay back 50% of your total finance amount until much later than simply halfway through the agreed term.

How to end a PCP deal early if you’re not eligible for voluntary termination

If you haven’t repaid 50% of the total finance amount, you can still end your finance agreement early – you’ll need to pay back the difference. For example, if you’ve already paid a total of £10,000 and the total finance amount is £30,000, you’ll have to pay an extra £5,000 to reach the required 50% mark.

Hire Purchase (HP) explained

Hire Purchase agreements consist of an initial deposit and a set number of monthly payments. Unlike PCP finance, there is no balloon payment at the end – instead, you will automatically own the car outright once you’ve made the final payment.

For this reason, monthly payments for an HP finance agreement will often be greater than for a PCP agreement.

Can I sell a car on HP finance?

Short answer: Yes, but you must settle any outstanding finance first – just as with a PCP agreement.

If you choose to sell it to a private buyer, you must agree on a settlement amount with your finance provider. This fee will cover the cost of all remaining monthly payments, plus interest.

As with PCP finance, you can choose to sell your car to a dealer instead. You will need to agree on a settlement amount with your finance provider, and take this information to the dealer who can pay off the remaining finance as part of the purchase.

How to end an HP agreement early

Hire Purchase finance agreements have similar voluntary termination options to PCP finance. You can choose to hand the car back to the dealer with nothing left to pay, providing you have paid off at least 50% of the total finance amount.

if you haven’t paid off at least 50% of the total amount, you should be able to pay the difference and end your finance agreement early.

Personal contract hire (PCH) explained

Personal contract hire (sometimes called leasing) is essentially a long-term rental agreement aimed at individuals. You agree on an initial deposit (up to one year’s worth of payments) and then make fixed monthly payments for the remainder of your finance term.

You will not automatically own the car at the end of your finance term like an HP agreement. Nor is there the option to make a final balloon payment like PCP finance if you decide you want to own the car outright.

As a result, monthly payments for PCH finance are generally lower than with PCP and HP finance. Some deals include servicing costs, however.

As with PCP finance, you may be charged additional fees at the end of your agreement if you return the car in poor condition or with higher mileage than set out in your agreement.

Can I sell a car on PCH finance?

Short answer: No. You are never the legal owner of the car during a PCH agreement and you won’t be able to agree a settlement figure with your finance company, as with PCP and HP agreements.

How to end a PCH agreement early

Ending a PCH agreement early is often more difficult than ending a PCP or HP agreement. In some cases, you may have to pay the entire outstanding finance amount – even if you return the car early.

Depending on your exact contract you may be able to use an ‘early termination’ clause to bring the agreement to a close. However, this usually involves paying a significant proportion of the outstanding finance amount first.

If you’re struggling to afford your PCH payments, it might be possible to extend your agreement to reduce the amount you pay each month. You’ll have to contact your finance provider to negotiate these terms. If you are experiencing financial difficulties, you may find it helpful to seek independent professional financial advice.

Personal loans explained

This is essentially a loan you get from a financial institution (such as a bank) that can be used for purchasing a car (or anything else, really). Interest rates are generally fixed, and the payment period can be as long as seven years. There is no balloon payment or deposit because, from the dealer’s point of view, the vehicle has been purchased in cash.

Can I sell a car with a personal loan?

Short answer: Yes.

A personal loan is between you and a bank. This means you can sell your car privately or to a dealer, but you will need to keep making repayments until you’ve paid off the entire loan amount (including interest).

Steps to sell your financed car

If you have determined that your finance deal allows you to sell or return your car, then follow this checklist to find out what to do next:

• Contact your finance provider to get an up-to-date settlement figure for your car.

• Pay off the total outstanding amount and have the vehicle transferred to your name. Once this is done you are free to sell your car privately or to a dealer. Many dealerships will offer to pay this settlement amount as part of the purchase.

• Remember that selling a car with outstanding finance is illegal. You must settle your agreement with your finance provider before selling your car privately.

How much is my car worth?

Want to find out how much your car is worth once you’re in a position to sell? Check out carwow’s valuation tool to find out how much you could get for it.

Better still, why not sell it with carwow? You can get offers from our network of trusted dealers quickly and easily, without having to deal with time-wasters or hagglers.

FAQ: Selling a financed car

Is it illegal to sell a car with outstanding finance?

Yes. You are not the legal owner of the vehicle until it is fully paid off. You are not legally allowed to sell it without settling any outstanding finance first. You can settle this amount by selling the car through a dealer, however.

How do I get a settlement figure for my car?

Contact your finance provider to get an up-to-date settlement figure for your car.

What happens if I sell a car with outstanding finance?

It is illegal to sell a car with outstanding finance to a private buyer without making them aware of this.

In order to legally sell your car, you must settle any outstanding finance first. If you are caught knowingly deceiving someone into buying a car with outstanding finance, you will be made to pay back what you owe to the finance company. You may also face legal action.

If your car is financed using Personal Contract Hire (PCH) finance, you cannot sell it at any point.

I bought a car with outstanding finance, what are my rights?

There are many online services that allow you to check whether a car has any outstanding finance before your buy it. They aren’t free, but they often include additional information, such as whether a car has been previously written off.

If you unknowingly buy a car that has outstanding finance payments, you still have the right to keep it providing you can prove you bought it in good faith. The finance company will attempt to check you are an innocent party first, but they will ultimately decide who must pay the outstanding finance.

Typically this will be the person who signed the original finance agreement but they may decide you are liable for this amount instead. You may want to seek legal advice in this situation or contact the Financial Ombudsman.

Does voluntary termination of car finance affect credit rating?

Voluntary termination will show on your credit record, but it will likely have a less detrimental impact than missing multiple finance payments. If you are experiencing financial difficulties, you should seek independent professional financial advice.