Can I sell a car that still has finance on it?

Who owns the car while the finance runs

With hire purchase or a PCP, the dealer sells the car to the finance company, which then owns it while you make the payments. You become the legal owner when you make the final payment and take up the option to purchase. The Financial Ombudsman Service describes a conditional sale in much the same way, with an expectation that you will buy the car at the end.

An ordinary loan is different: nidirect says that with most credit agreements you own the goods from the outset. Check which kind of agreement you signed before you advertise the car.

Ask the lender for a settlement figure

If your agreement is a regulated consumer credit agreement, section 97 of the Consumer Credit Act 1974 requires the lender to give you a statement of the amount needed to clear what you owe, with particulars showing how it is worked out. The lender has 7 working days from your request to give it, and the request need not be in writing unless the agreement is secured on land.

If you ask again within one month of a request the lender has already answered, it does not have to reply again. The figure is worked out to a settlement date, which is 28 days after the request unless you ask for a later one.

Pay it, then sell

Section 94 entitles you to settle a regulated agreement at any time by giving notice and paying everything due, less the early-settlement rebate and plus any compensatory amount the lender is allowed to claim. On a PCP, becoming the owner means paying the final payment as well, and the lender’s statement must show how its figure is arrived at, so you can see whether it is included.

Once the lender confirms the settlement has been paid and the car is yours, you can sell it. Then tell DVLA you have sold it: your vehicle tax is cancelled and you are refunded for any full months left.

If the car sells for less than you owe

The settlement figure is the payment needed to discharge your agreement, whatever the car sells for. If the sale price is lower, you pay the difference to the lender yourself, so get the figure before you agree a price. It is worked out to a date, so a different settlement date can give a different figure.

Selling without clearing the finance

nidirect says you cannot legally sell goods under a hire purchase agreement until it has been paid off. A private seller also gives the buyer an implied term that they have the right to sell the goods, under section 12 of the Sale of Goods Act 1979; a trader gives the equivalent under section 17 of the Consumer Rights Act 2015.

What a buyer can do if a financed car is sold to them anyway is covered in our answer on buying a car that still has finance on it.

Where this applies

The Consumer Credit Act, the Sale of Goods Act and the Consumer Rights Act all extend to the whole of the UK, including Northern Ireland. If you would rather end the agreement by handing the car back, that is a separate right with its own answer.