Thinking about selling a financed car? Here’s what you need to know first
Yes, you can sell a car that is still on finance, but you cannot simply hand over the keys and pocket the money. The lender has a legal interest in the vehicle until the finance is fully repaid, so the outstanding balance has to be settled as part of the sale. This guide walks through every option available to you, whether you are selling privately, part-exchanging at a dealer, or looking at other ways to exit your agreement.
Yes, but the finance has to be cleared first. Under a hire purchase agreement, the lender owns the vehicle until the final payment is made. That means you cannot legally transfer ownership to someone else while the finance is still running, because the car is not yours to sell.
In practice, most people either settle the finance before completing the sale or use the proceeds of the sale to pay it off at the point of handover. Both approaches are possible and both are used regularly. What you cannot do is sell the car and keep making monthly payments as if nothing has changed.
For more on how ownership works under HP, see: You won't own the car right away.
The first step before selling is to get a settlement figure from your lender. This is the exact amount you need to pay to clear the finance in full on a specific date. Settlement figures are usually valid for 14 days and will account for any interest that has already accrued.
You can request a settlement figure at any time. Contact your lender directly and ask for it in writing. Once you have it, you know the minimum the sale needs to generate to clear the debt. If the car is worth more than the settlement figure, you keep the difference. If it is worth less, you will be left with negative equity.
AutoMoney Trust customers can request a settlement figure through the existing customers page.
If you sell a car while finance is still owed and do not settle the debt, the buyer could end up owning a vehicle the lender still has a legal claim over. In that case, the lender has the right to repossess the car from the buyer, even though they paid for it in good faith. This causes serious legal and financial problems for both parties.
Buyers can check whether a car has outstanding finance before purchasing using a vehicle history check (HPI check). Most informed private buyers will do this. If finance is found and the seller has not disclosed it, there can be legal consequences.
This is why the settlement must be handled properly, either before the sale completes or simultaneously at the point of handover, with confirmation from the lender that the finance is cleared.
Selling privately usually gets you a better price than part-exchanging, but it takes more organising when finance is involved. The most common approach is:
If the buyer is paying cash, this is straightforward. If they are getting their own finance, their lender may pay yours directly as part of the transaction. Either way, the buyer should not receive the V5C or keys until the outstanding finance is confirmed as cleared.
Be transparent with any potential buyer that the car is on finance. Concealing it is not just bad practice, it can have legal consequences.
Part-exchanging at a dealership is the most straightforward way to sell a financed car. Most dealers deal with outstanding finance regularly and will handle the settlement as part of the transaction. The process typically works like this:
Part-exchanging is lower admin than a private sale, but the trade-off is that dealers price in their margin, so you will usually get less for the car than selling privately.
If you are buying your next car on finance, use our car finance calculator to see what monthly payments might look like before you commit.
Negative equity is when your car is worth less than the amount still owed on the finance. For example, if you owe £8,000 but the car is only worth £6,000, you are in negative equity by £2,000.
This does not stop you from selling, but it does mean you have to cover the gap. Options include:
The FAQ The car could lose value covers depreciation under HP in more detail.
Yes, dealers will part-exchange a car in negative equity, but the shortfall gets added to your next finance agreement. This is sometimes called negative equity rollover. It means you are borrowing more than the car you are buying is worth from the start of the new deal.
This is worth thinking through carefully. A larger loan means higher monthly payments or a longer term, and you could end up in negative equity again on the new car if it depreciates quickly. Make sure the monthly payments on the new agreement are genuinely affordable before agreeing.
Voluntary termination is a right under the Consumer Credit Act that lets you hand the car back to the lender once you have repaid at least 50% of the total amount payable under the agreement. If you have not yet reached 50%, you can make up the difference and then terminate.
This is not the same as selling. You do not receive any money from voluntary termination and you walk away from the agreement with nothing. But if the car is in significant negative equity and you cannot afford to cover the shortfall through a sale, it can be a way to exit cleanly.
Our FAQ on ending car finance through voluntary termination explains the conditions and process in full.
Returning a car because of a fault is a different situation to selling. If a car develops a serious fault, you may have rights under the Consumer Rights Act 2015, including the right to reject the vehicle within 30 days of purchase or request a repair or replacement after that.
Finance adds a layer to this because the lender is also a party to the agreement. If you bought the car on HP through a dealer and there is a fault, your lender may have joint liability with the dealer under Section 75 of the Consumer Credit Act.
If you are having problems with a financed vehicle, see our guide on problems with a financed car for more detail on your options.
If you are selling your current car and looking for finance on your next one, AutoMoney Trust offers hire purchase finance from £4,000 to £25,000 over 36 to 84 months with no deposit required. We consider applications from people with poor credit. Start with a soft search that will not affect your credit score on our apply for car finance page.
With an AutoMoney Trust hire purchase agreement, legal ownership of the car transfers to you only after you have made all of your monthly payments and paid the £10 option to purchase fee at the end of the agreement. Until then, the vehicle remains the property of AutoMoney Trust.
Although you won't legally own the car during the finance term, you are responsible for its day-to-day running costs, including vehicle tax, insurance, MOT, servicing, and maintenance. As the finance provider owns the vehicle until the agreement is complete, you cannot normally sell, transfer ownership of, or make significant modifications to the car without our permission.
It is also important to keep up with your car finance payments, as missed payments could lead to arrears and, in some circumstances, the vehicle may be at risk of repossession if the agreement is not brought back up to date.
Once you have made your final monthly payment and paid the option to purchase fee, legal ownership transfers to you, and the car becomes fully yours with no further finance obligations.
Yes, you may be eligible for voluntary termination of car finance if you've paid at least 50% of the total amount payable under your hire purchase agreement. Under section 99 of the Consumer Credit Act 1974, customers have a legal right to voluntarily terminate your hire purchase agreement, provided the required conditions are met.
Voluntary termination (VT) of car finance allows you to return the vehicle and end your hire purchase agreement without making the remaining monthly payments. If you've paid less than 50% of the total amount payable, you may still be able to request voluntary termination, but you'll need to pay the difference before the agreement can be ended.
The vehicle must also be returned in reasonable condition, and any outstanding arrears or missed payments will need to be cleared before the agreement can be concluded.
Choosing voluntary termination on a hire purchase agreement may be recorded on your credit file and could be considered by future lenders when assessing applications. Before deciding whether this is the right option for your circumstances, we recommend speaking to AutoMoney Trust. Our team can explain the process, discuss any alternatives and help you understand the potential impact on your finance agreement.
Yes, your car is likely to lose value during the finance agreement. Most cars depreciate over time, meaning they gradually lose value as they age. For most used cars, depreciation continues throughout a Hire Purchase agreement, so the vehicle is typically worth less at the end of the finance term than when it was purchased.
Depreciation is important because the total amount payable on a car finance agreement includes the amount borrowed, interest, and any applicable fees. As a result, the total amount you repay over the agreement may be higher than the vehicle's market value by the time your finance ends.
Depreciation can also increase the risk of negative equity. If you decide to settle your car finance early or sell the vehicle before your agreement has ended, the car's current market value may be lower than the outstanding finance balance. In this situation, you may need to pay the difference before the agreement can be settled.
The rate at which a car depreciates depends on several factors, including its age, mileage, condition, service history, brand, model, and market demand. Keeping your vehicle well maintained and within reasonable mileage can help preserve its value over time, although depreciation cannot be avoided completely.
Some drivers also choose to take out GAP insurance, which may help cover the difference between an insurer's payout if the vehicle is written off and the remaining balance on the car finance agreement. This can provide additional financial protection particularly during the earlier years of a hire purchase agreement, when the outstanding finance may be higher than the vehicle's market value.
Car finance can affect your credit score positively or negatively depending on how you manage your agreement. Making regular, on-time payments can help build a positive credit history and demonstrate responsible borrowing, while late or missed payments can negatively affect your credit score and make it more difficult or expensive to access credit in the future.
If payments are not made on time, they may be reported to credit reference agencies, which can lower your credit score and make future borrowing more difficult or potentially more expensive.
When you apply for car finance, a lender may carry out a hard credit search, which appears on your credit file and can cause a small, temporary change to your credit score. This is a normal part of the application process and helps lenders assess whether finance is affordable and suitable for you.
For more information about how applications are assessed, read our guide on Credit Checks for Car Finance.
