Financing is an obvious way to buy a car, but what are your options for selling a financed car?
Life can sometimes throw you a curveball – maybe a career change or a new baby – which might make it hard to keep up with your current car finance payments.
Selling a financed car isn't as straightforward as selling a car you own yourself, but it can be done. This guide will talk you through the process of selling your financed car, and help you decide if it's the right option for you.
Get a quick, competitive valuation on your current car or find out more about selling your car to Motorpoint.
Can I sell a car on finance?
You can sell a car with outstanding finance, but it's more complicated than selling a car you own outright. This is because you aren’t the owner of the car, despite being its registered keeper. The finance company that organised your agreement remains the car's legal owner until the agreement is fully settled.
To sell a financed car, you'll need to get a settlement figure from your current finance company. This is the amount you'll need to pay to settle the finance. Once this figure is paid off, you're free to sell the car.
Many car dealers and retailers (like Motorpoint) will settle your finance for you if you want to switch to another car. They'll bundle the cost of settling the finance, along with any positive or negative equity into your new finance agreement. You'll face extra fees compared with simply completing the finance agreement, but this is a good option if you find you need a larger car, or something with lower monthly payments.
How to sell a financed car
Here are the steps you'll need to take to sell a car with outstanding finance:
- Get in touch with your finance provider and ask for a finance settlement figure
- Find out how much you'll get from a dealer or car-buying service for your financed car
- If your car's worth more than your settlement figure, you have positive equity
- If your car's worth less than your settlement figure, you have negative equity and must pay the difference
- Complete the sale once you've got a price you're happy with
- Use the money from that sale to pay off the settlement figure
- Any positive equity can then be rolled into your next finance agreement
- Any negative equity can be separately paid off or rolled into the next agreement
What is a settlement figure?
If you’d like to sell your financed car, your finance company will be able to provide you with a settlement figure. This will tell you how much you’ll need to pay to cover all the remaining finance plus any additional outstanding fees. Once you've paid off the settlement figure, the car will be yours to sell on.
If the maths works out in your favour, you’ll get more back from the sale of the car than you spent settling the finance – this is known as positive equity. However, it’s possible that you might get back less from the sale of your car than the settlement figure, leaving you out of pocket or in negative equity.
The exact details change depending on whether you took out personal contract purchase (PCP) or hire purchase (HP) finance. Keep reading to learn more about your options for ending these two common types of car finance.
Can you sell a car financed on PCP?
PCP finance sees you pay back some of the car’s value over the course of the finance deal. Once the PCP deal comes to an end, you can either hand the car back and walk away, trade it for another car from the same dealer or lender, or pay the optional final balloon payment and own the car outright.
You won’t own your PCP-financed car until you’ve paid off all the finance, all the fees, and the final balloon payment. If you choose not to pay the final balloon and hand the car back, then you won’t ever own it and won’t have the option to sell it.
If you want to sell your PCP-financed car, you’ll need to request a settlement figure from your finance provider. This figure will include all remaining finance and fees from the agreement, plus the optional final balloon payment and any penalty payments that might be applied for early repayment.
Once you’ve paid the settlement figure to the finance company, you will be the legal owner of the car and are free to sell it on. You can use any money you make in the sale of the vehicle to cover the costs you incurred from settling the finance. It’s worth very carefully weighing up how much you believe you can get from the sale of the vehicle against the price of the settlement figure.
Can you sell a car financed on HP?
You're free to sell your HP-financed car once you've paid off the finance in full. You won’t own your car until the HP finance agreement is settled, so you won’t have the right to sell it while the agreement is still being paid off. With HP finance, once you’ve completed the agreement, the car is yours with no further balloon payment to make, allowing you to immediately sell it if you choose to.
If you’ve paid 50% or more of the total HP agreement, you might have the option to return the car to the finance company. If not, you’ll have to pay a settlement to bring yourself up to the 50% point if you’ve not yet reached it. This option means you won’t be able to sell the car at any point, but it will close the finance agreement if you’re struggling to meet the monthly repayments.
Can I part exchange a car on finance?
Yes. Most large car dealers and retailers (including Motorpoint) will accept a car with outstanding finance as a part exchange. Just let them know the car is still under finance and either bring your own valid settlement figure, or the dealer may be able to obtain one directly from your lender.
When you've chosen what car you'd like to part exchange for your current car, and have your settlement figure in hand, you're ready to begin. The car dealer will settle your old finance agreement and accept your old car as a part exchange. Any positive or negative equity from the old car will be rolled into your new finance agreement.
Can I end a finance deal early?
We’d strongly suggest trying to keep up with the payments for your car finance if this is possible, because you’ll likely end up paying more in the long run if you seek to modify the deal’s terms part-way through.
However, if you need to end a finance deal early, you can ask for the full settlement figure, which includes all the remaining finance, fees, charges and the final balloon payment if it's a PCP deal. Once you’ve paid this, the finance deal will be over and the car is yours to do whatever you want with.
Is there a more simple way to sell a financed car?
Settling a finance agreement yourself so you can then sell the car can be a bit of a hassle. There is usually a more straightforward option available, however.
Your finance provider, along with most car retailers and dealerships, will be able to discuss your finance options with you. This can include arranging a settlement on your existing financed vehicle, and building the price of that settlement into a new finance agreement – potentially on a more affordable car if you’re struggling to keep up with your current payments.
At Motorpoint, we’re able to look at your existing finance package, even if it’s not with us, and establish your settlement figure. We can then settle your outstanding finance and roll that cost into a new finance package. This can be for a more affordable car, helping you stay on the road while cutting your costs.
Can I sell a car I bought with a bank loan?
If you got a personal loan to purchase your car, then you’re free to sell it at any point. This is because you bought the car outright with the money from the loan. You will, of course, have to continue repaying the loan until it’s settled, but you’re free to sell the car at any time after buying it.
In most cases, you can get a settlement figure for the loan you took out from the provider if you want to close the agreement early. If you sell your car, this sum might be enough to cover the settlement figure, but keep an eye out for any early repayment charges you might face for paying off the loan before the end of the agreement.
Can I sell a car financed on PCH (leasing)?
No. If you decide to lease a car – usually called Personal Contract Hire (PCH) – you can't sell it. This is because you're essentially renting the car over a long period of time without the option to buy it. As a result, you aren't the car's owner, and don't have the right to transfer that ownership onto someone else.
PCH leasing deals are built so you use the car as if it were your own during the agreement period. Afterwards, you hand it back to the company with the option to start a new leasing agreement. Your leasing provider might be willing to sell you the car after your lease agreement, but you'd need to discuss that beforehand. If you do successfully buy the car from the leasing provider, you're then able to sell it whenever you want.
Learn more about car finance
Read our car finance options guide to learn more. If you’re looking for ways to keep your costs down, take a look at our picks for the best fuel-efficient cars. If you want to reduce your monthly outgoings, read our explainer for cutting your car repayments. Or, if you fancy a fresh car without the up-front cost, find out how you might be able to get no-deposit car finance.
