Who owns a car on finance
On hire purchase and PCP, the finance company usually owns the car until the last payment is made. You are the registered keeper, and your name is on the V5C, but the lender's interest is recorded against the car. That is why a car on finance cannot simply be sold and handed over: the lender has to be paid off as part of the sale.
A personal loan is different. If you borrowed money from a bank and bought the car outright, the car is yours and the loan carries on separately. If you are not sure which kind of agreement you have, the paperwork from the lender will say, or you can ask them.
Step one: ask the lender for a settlement figure
The settlement figure is what it costs to clear the agreement on a given date. It is usually less than the total of the remaining monthly payments, because some of the interest falls away when you settle early. Ask the lender, not the dealer that sold you the car, for an early settlement figure. You are entitled to one for a regulated agreement.
Settlement figures are dated, because interest keeps running. Ask for one that runs a little past the date you expect the car to be collected.
When you ask for an offer at /vehicle-valuation, say there is finance and roughly how much is left. It changes nothing about the offer, but it lets the valuer plan the settlement with you.
Positive equity: the car is worth more than you owe
If the offer is higher than the settlement figure, the lender is paid first and the balance comes to you. Paid in full by bank transfer before your vehicle leaves: the lender's share goes to the lender, and the rest goes to the account you name.
You do not need to clear the finance yourself before selling. The settlement is part of the sale.
Negative equity: you owe more than the car is worth
If the settlement figure is higher than the offer, there is a gap, and the sale can only complete if the gap is paid. Some people pay it from savings. Others decide to keep the car and sell later, when more of the balance has been paid down.
We will tell you plainly if the numbers put you in negative equity, and we will not push a sale that does not suit you.
Voluntary termination, the other route
On a regulated hire purchase or PCP agreement you may have a right to voluntary termination once you have paid half of the total amount payable. That lets you hand the car back to the lender rather than sell it. Whether it beats selling depends on your figures and the condition of the car, so ask your lender how it applies to your agreement before deciding.
If money is tight, free and impartial debt advice is available from services such as StepChange and Citizens Advice.
What to have ready
A finance sale needs a few extra details on top of the usual documents.
- The lender's name and your agreement number.
- A settlement figure valid past the expected collection date.
- The V5C, photo ID and both keys, as for any sale.
- The bank details for the account the balance should go to.
How the sale runs on the day
We call ahead before we collect, and you can join the test drive. The price holds if the vehicle is as described. Any change is explained first, and you can say no. Once you are happy, the lender is settled and the balance is paid to you. We handle the DVLA paperwork.
The full picture, with worked examples, is on /finance-settlement, and the steps of a sale are on /how-it-works.
Every dealer who buys through us agrees to our dealer code of conduct, which covers paying the seller in full before the car leaves.