Selling a car on finance
Although it’s not as straightforward as selling a car that you’ve paid for in cash, there are ways of going about it. Let’s take a closer look.
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Can I sell a car with outstanding car finance?
The short answer is yes, providing you settle all the finance that’s owed on it first. What you can’t do is sell a car with any finance outstanding in the conventional way, i.e. accept cash from a private buyer and hand the keys over to them.
If you’ve decided that you do want to sell your current financed car, there are a few steps that you'll need to follow:
Firstly, contact your finance provider to let them know.
They should then provide you with a settlement figure. A settlement figure is the amount you need to pay to end the agreement. This will include money you still owe on the car, including interest, minus the deposit and any repayments you’ve already paid. The settlement figure usually lasts for 28 days once you’ve received a copy in writing.
If you’ve already paid off more than 50% of the agreed loan amount, you can usually hand the car back and close the remaining contract at this point under a process called ‘voluntary termination’. You may still have to pay any missed payments, unpaid fees or charges outstanding on the account.
If you haven’t yet paid 50% of the original agreement, you might still be able to return the car to the lender, but you will have to pay the difference between 50% of the agreement and what you have paid to date.
In both cases, any damage to the car over and above acceptable wear-and-tear will need to be repaired before you return the vehicle. This includes missed services and outstanding repairs.
If you can’t pay off your finance agreement early, then you can’t return the car and finance another.
You’ll need to pay off the settlement agreement as set out by your lender before you can ‘sell’ it and get another via a new finance deal.
However, depending on the kind of finance arrangement that you have, you may be able to take out a new negative equity car finance agreement to absorb the amount outstanding from the previous agreement. The newer vehicle must be a cheaper model than your existing car if it’s to include the negative equity amount still outstanding.
If you find yourself in the position where you need to end your finance agreement early but are unable to meet the costs associated with doing so, it’s time to get some external financial advice. (Citizen’s Advice is a good starting point). If you’re struggling to make your repayments in general, talk to your lender – they will want to support you.