Outstanding Finance on a Car

If you're looking to change your car with outstanding finance, it's important to understand your options.

There are specific differences selling a car and trading in a car with outstanding finance.

What is outstanding finance?

Outstanding finance refers to the remaining amount of money you owe on a credit agreement.

If you borrow money to purchase an asset - such as a car - you will have outstanding finance. However, as you make monthly payments towards a car, the balance of this outstanding finance will decrease.

Can I sell a car with outstanding finance?

You should not sell your car if you're not planning on paying off any outstanding finance on it before you sell.

When you financing a car, you're considered to be its registered keeper - this means that you won't own the car until you've paid off the balance in full.

Until this point, your car finance company has ownership.

What happens if I sell a car with outstanding finance?

It's important to know that you should not be selling a car with outstanding finance. In fact, it is illegal to sell a car that is in an outstanding finance agreement.

Transferring ownership of a car with outstanding finance is also not allowed, and you will need to settle your agreement before you sell it.

If you sell a car with outstanding finance, then legal action may be taken against you. If a person can prove that the car was mis-sold, you will still be obliged to pay the money you owe back in full.

What if my car is on a PCP deal?

Things can work a little differently if your car is on a PCP deal, as this finance package offers a little more flexibility.

In the event of your car being worth more than the outstanding finance then - with the permission of your lender - you can sell the car, pay off the finance, and keep the difference.

A straighforward way to do this is to sell directly to a dealership, such as Stoneacre.

Can I trade in a car with outstanding finance? 

Trading in a car that has outstanding finance is typically a much easier situation, and is a fairly common practice.

In a similar way to selling your car on a PCP deal, trading in a car with outstanding finance is easy enough when the car is worth more than you owe on it.

Getting a valuation on the car would be your first step in this scenario, followed by seeing how much you have left to pay on the finance agreement.

The latter can be achieved by requesting a settlement figure from your lender.

Any difference between the finance owed and what the car is worth can then be used as money towards a new car.

Can I trade in a car with negative equity?

If you decide to trade in a car that's worth less than the outstanding finance, then this amount can be worked into a deal for a new car, or you can pay off the finance to start from scratch.

Learn More about Negative Equity

What happens if I've bought a car with outstanding finance?

Buying a car with outstanding finance can be a tricky business. A car finance company may contact you to investigate the car and its registered keeper.

You will need to prove that you were unaware of any outstanding finances at the time of purchase. If you can prove that you're an 'innocent buyer', you may be able to keep the car.

When you buy a car, especially from a private seller, you should always be aware of the risks. You can keep proof to show that this information was not disclosed to you.

Evidence can include:

• Advertisement(s) for the car
• Messages with the seller
• Documents and receipts of sale

How to check if a car has outstanding finance:

You can check if a car has outstanding finance using an online service - such as GOV.UK - where you can search for the car in question.

You can also check if your car has been written off and whether it is still road-safe.

When purchasing a car from a dealership, it can be prudent to ask about any saeguards in place where such instances of outstanding finance can be avoided.

Stoneacre, for example, puts each car through a thorough HPI check before putting any car on sale, making sure no outstanding finance is present.