Sell A Car On Finance: Step-By-Step Guide
Thinking about selling your car, but still have finance outstanding?
You’re not alone. Selling a car with finance is a very standard thing to consider.
According to recent figures, 86.5% of new private cars purchased in the UK between April 2016 and March 2017 were bought on finance, typically PCP.
And as most car finance deals will have a term of around 5 years, what happens if you decide you want to sell your car within that period? Can you do it?
The short answer is 100% yes. You can still get cash for your car! Selling your car with finance outstanding is quick and easy. But there are caveats. And there are processes that you must follow.
In this guide we’re going to run through everything you need to know to sell a car on finance quickly. Let’s get started with an obvious question…
Who Owns The Car On Finance?
Buying a car on finance is a bit like taking out a mortgage on a house.
The way that PCP and most other car finance products work is that your name will be on the paperwork, but technically, the car is still owned by the lender until you complete your repayments.
So before you can sell your car you will have to pay off the outstanding finance amount in full.
But don’t worry. As we will explain in a moment, the process of paying off the finance can be completed at the same time as the car is sold.
So now let’s run through the steps you’ll need to take to sell your car with outstanding finance.
Important: To sell the car you will need to make sure that you are able to fully repay the outstanding amount, otherwise you will need to pay money to sell your car.
Unfortunately if the value of your car does not cover the remaining finance (and you still want to sell) you will have to use personal funds to cover the shortfall. Don’t worry if this applies to you, while not ideal, ‘negative equity’ in car finance is actually quite common.
Step 1: Contact Your Finance Company
Your first step should be to contact your finance company and advise them that you are considering selling your car.
Ask them for a settlement figure (i.e. the total amount outstanding on the finance), and to send you written confirmation of the same.
While most lenders should be amenable to a sale (provided you fully repay the finance at the time of sale), you should confirm their policy before proceeding.
Note: Some lenders may charge a fee for early settlement. If this is the case it should be stated in the terms of the contract you signed when you first took out the finance on your car.
Step 2: Obtain An Up To Date Valuation For Your Car
As we mentioned above, you’ll need to clear outstanding finance before selling your car.
So once you have the settlement figure, you’ll need to know if:
- a) The proceeds of selling your car will cover the outstanding finance
- b) If not, the shortfall that you will have to cover
The best way to get an accurate online valuation for your car is to use Motorway’s free car buyer comparison tool.
We compare the entire car buying market, so you’ll be able to review offers from multiple car buyers at once.
That way you will get an accurate indication of the current value of your car from instant car buyers.
What If The Valuation Is Higher Than The Finance?
If the value of your car is greater than your outstanding finance, then there should be no problems completing a sale. In fact, you will have a surplus after everything is finalised.
What If It’s Lower?
If it is lower, deduct the valuation from the settlement figure to work out your shortfall.
Note: If your car is not in perfect condition (i.e. no scratches, dents, or dings) we would advise factoring in a leeway of around £200-£300 in case there are any deductions at final valuation.
Step 3: Prepare Your Car With Finance For Sale
Before you can sell your car, you’ll need to be in receipt of the written settlement figure from your lender. A print out from an online statement will not normally suffice.
Once you have it, complete the following pre-sale checklist to ensure you get as close to full valuation as possible:
- V5 Document – for proof of ownership
- Service History – a full service history will lead to better offers for your car
- MOT Certificate – ensure you have a copy of your current certificate
- Spare Key – a spare key will help to ensure you receive full valuation
- Valet – it’s worth spending £15/£20 on a full valet to ensure your car is looking spotless inside and out
- Minor Repairs – as previously mentioned, scratches and dings can impact valuation, so make any minor repairs you can before sale
For more details see our full checklist in our ultimate car selling guide.
Note: Settlement figures from financial institutions will have an expiry date attached. If you do not sell your car before this date, you will need to request a new settlement figure before proceeding.
Step 4: Run A Fresh Online Valuation And Select A Car Buyer
Most offers from car buyers will expire after a maximum of 7 days.
So you’ll need to run the valuation tool again to get up to date offers, or try another method of car valuation for an updated price.
All of the car buyers featured on the Motorway website are able to purchase cars with outstanding finance, so select the best offer for your car and proceed to step 5.
If you get stuck or have any questions at this stage, most car buyers on Motorway also have a call centre staffed with experience buyers who will explain the steps to clear the finance. It’s very straightforward.
Step 5: Book An Appointment To Complete The Sale
Depending on the car buyer you choose, they will either:
- a) collect your car at your home address
- b) ask you to deliver it to a local depot
Either way, you will require to have all paperwork and written confirmation of your settlement figure to complete the sale.
Once the car has been inspected and final valuation figure agreed, the next step is to settle the outstanding finance.
Step 6: Settle The Outstanding Finance On Your Car
The process of settling your outstanding finance will vary depending on both your finance provider and the company buying your car.
Some car buyers will deal directly with your finance company to settle the outstanding balance, while others may ask you to settle the finance independently.
If the latter, then you will normally be able to do so over the phone, or via online banking.
You should discuss the exact process with both your finance company and your chosen car buyer.
As mentioned at the start of this guide, selling a car on finance is a common occurrence these days, so most lenders will have processes in place.
Communication is key at every stage to ensure a smooth sale.
Step 7: Complete The Sale Of Your Financed Car
With the outstanding finance finally settled, the car is officially yours to sell.
Complete the necessary paperwork with the car buying company and conclude the sale of your car.
Step 8: Receive Any Surplus Funds Into Your Bank Account
If the sale value of your car was greater than the value of outstanding finance, you will receive the balancing payment from your car buyer after completion of the sale.
Note: Some car buyers will release these funds instantly, while others may take 3-4 days to complete the transfer.
And that’s the full process of selling your car on finance.
Finally: Always Talk To Your Finance Lender
There are many reasons why you might want to sell your car during the term of your finance agreement. For example, you might simply want to upgrade to the latest model.
But if you are looking to sell as you are struggling to meet repayments, then always speak to your lender to inform them of your situation.
Lenders understand that financial circumstances change, and will do what they can to help you manage your payments, or arrange an alternative repayment schedule.
We have already stated this above, but to reaffirm:
Do not attempt to sell a car with outstanding finance without informing your lender first.
Questions About Selling Your Car On Finance
If you have any questions about the process of selling a car with outstanding finance we would be happy to help.
Feel free to get in touch via our contact page.
For more information on how to get the best price for your used car, see our full guide to selling your car and our guide to car buying sites,