Selling a car that is still on finance: how it works

Plenty of cars on UK roads still have finance owing on them. The good news is you can still sell a car that is on finance. It just takes one extra step compared with selling a car you own outright.

First, know your finance type

How you sell depends on the kind of agreement you have.

• With Hire Purchase, you do not own the car until the final payment, but you can settle early and sell
• With Personal Contract Purchase, you also do not own the car until you pay the optional final balloon payment
• With a personal loan used to buy the car, you own the car outright and the loan is separate

If you paid with a personal loan, the car is yours to sell like any other, and the loan is your responsibility to repay separately. The steps below apply mainly to Hire Purchase and PCP.

Get a settlement figure

The first practical step is to ask your finance company for a settlement figure. This is the amount needed to clear the agreement in full today. It is usually valid for a set number of days.

The settlement figure can differ from the total of your remaining monthly payments because it may include interest adjustments. Always work from the official figure, not an estimate.

Compare the settlement to your car's value

Once you have the settlement figure, compare it to what your car is worth. There are two possible situations.

• Positive equity, where your car is worth more than you owe. The sale clears the finance and you keep the difference.
• Negative equity, where your car is worth less than you owe. You need to cover the shortfall to complete the sale.

Most sellers are in positive equity, especially if they have owned the car a while. If you are in negative equity, you have options, and it is worth reading a dedicated guide on that.

How the sale actually works

Selling a financed car is usually smoother than people expect because the buyer often handles the finance side for you.

• You get a firm offer for the car
• The buyer pays your finance company the settlement figure directly
• Any money left over after the settlement is paid to you
• The finance agreement is closed and ownership transfers

When you sell through a marketplace like CarSavvi, the winning dealer helps settle your outstanding finance as part of the deal. You list your car for free, verified dealers bid, and the dealer who wins deals with the settlement and pays you the balance. CarSavvi is not a party to the sale and does not provide financial advice, it simply connects you with the dealers who compete to buy the car.

What paperwork you need

Have these ready to keep the sale moving.

• Your V5C logbook
• Your finance agreement details and finance company contact
• A current settlement figure
• MOT history and service records
• Proof of identity as the seller

A few things to watch

Keep these in mind so there are no surprises.

• Do not let the settlement figure expire before the sale completes
• Make sure the buyer pays the finance company directly rather than paying you to pass it on
• Get written confirmation once the finance is cleared
• Keep proof of the whole transaction

The bottom line

Selling a car on finance is normal and the process is well worn. Get your settlement figure, find out what the car is worth and let the buyer handle the settlement. If the car is worth more than you owe, you walk away with the difference.

Want to see whether you are in positive equity? Enter your registration on CarSavvi to get a free valuation and see what verified dealers will pay.