Who owns a car bought on PCP or hire purchase?

While you are paying

The Financial Ombudsman Service explains that the dealer sells the car to the finance provider, which then owns it, and you pay monthly to use it. On hire purchase or a PCP you become the legal owner when, and if, you make the final payment, also called the balloon payment, at the end. If you do not want to own it, you do not make that payment and can return the car.

The Consumer Credit Act 1974 defines a hire-purchase agreement the same way: the property in the goods passes to the hirer if the terms are complied with and the hirer exercises an option to purchase.

Conditional sales and leases

A conditional sale is very similar, with an expectation that you will buy the car outright at the end, although the Financial Ombudsman Service notes that most modern ones include options to return the car. With a hire or lease agreement the finance provider owns the car throughout and ownership never passes to you.

What the V5C shows

GOV.UK says the V5C shows the vehicle’s registration number, the keeper’s name and address, and details such as the make, the VIN and the number of previous keepers. That is a record of the keeper.

A 2010 written statement to Parliament from the Department for Transport, announcing the redesigned V5C, said buyers often mistakenly believe it is proof of ownership and that this is not the case. It added that DVLA and the Driver and Vehicle Agency in Northern Ireland were promoting a “buyer beware” message: buyers need to ask for proof of ownership, for example a bill of sale.

What it means in practice

If you want to sell or part exchange a car on finance, the agreement has to be settled first, which you can do at any time on a regulated agreement. What a buyer can do if a financed car was sold to them is covered in our answer on buying a car that still has finance on it.