How to sell a car on finance – the ultimate guide

Car finance, whether PCP or HP, is often the easiest and most affordable way to buy a new or used car from a dealer.

Nowadays, a huge number of cars in the UK are bought on finance plans, allowing you to spread the cost over multiple payments. This means that you don’t legally own the car until the final payment has been made, which can be a problem when trying to sell your car on.

In most cases, with Motorway, you can still sell your car even if there is an outstanding finance plan – then use the money to pay off the finance. That usually means no more payments, and you get to keep the difference after the finance deal has been settled.

Read on for our step-by-step guide on how to sell a finance car with Motorway, and learn more about the different types of finance available as a buyer.

What’s the difference between different types of finance plans?
How can I sell my financed car with Motorway?
How do I get a settlement figure for my car?
Is it illegal to sell a car with outstanding finance?
How do I transfer ownership of a car with outstanding finance?
What is negative equity?

What’s the difference between different types of finance plans?

There are lots of ways to help you afford to buy a new or nearly-new car. Here are a few of the key finance agreements and what they mean when it comes to selling your car.

Personal Contract Purchase (PCP)

This is one of the most common ways to buy a new car, thanks to its flexibility. It works by paying an initial deposit, usually around 10% of the car’s price, followed by fixed monthly instalments. You only pay off part of the car’s value during this time, usually over 3-5 years. At the end of the agreement, you can either pay the large final “balloon payment” to own the car outright, hand it back with nothing more to pay (as long as you’ve stayed within mileage and condition limits), or part-exchange it for another car on a new PCP deal.

PCP works well for people who like changing cars every few years, but it does mean you’ll face mileage restrictions, potential charges for excess wear, and a large lump sum if you decide you want to keep the car at the end.

Hire Purchase (HP)

HP is more straightforward on paper, but usually a more expensive option. After paying an initial deposit, you make fixed monthly payments until the entire cost of the car, plus interest, is covered. Once the final payment is made, the car is yours.

This makes HP a good option for someone who ultimately wants to own their car outright and avoid restrictions like mileage limits. However, the monthly instalments are usually higher than with PCP, and you still don’t legally own the car until the end of the agreement. It suits those who want an affordable route to ownership and plan to keep their car for the long term.

Personal Contract Hire (PCH)

PCH is another term for car leasing, which is essentially a long-term rental with no option to buy. As such, you cannot sell a car you’re leasing through any method, including Motorway, as you never legally own it.

You pay an upfront amount, followed by fixed monthly payments for a set period, usually two to four years, and then simply return the car when your agreement ends. As such, we do not include leasing when we talk about finance in this guide – but it’s a helpful purchase plan to know about.

Personal Loan

A personal loan is where you borrow money from a bank or lender to buy a car outright. You then repay the loan in monthly instalments, with interest, over an agreed term. The car is yours from the start, so there are no mileage restrictions or return conditions.

Because the loan is linked to you, and not directly to the car, this makes it easier to sell. You can sell your car with Motorway, then use the money to pay back your personal loan from the bank. In this situation, you would need to sort all the paperwork directly with the bank or lender after you have sold the car, in order to pay off your personal loan.

How can I sell my financed car with Motorway?

Step 1: Get a settlement letter

Contact your finance company to advise them that you’re considering selling your car, and ask them to provide a settlement letter. This will show how much finance is left on your car.

While most lenders should allow you to sell (providing you fully repay the finance at the time of sale), you should confirm your policy before proceeding. 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.

It’s worth noting that settlement figures from financial institutions will have an expiry date attached. If you don’t sell your car before this date, you’ll need to request a new settlement figure before proceeding.

Step 2: Value your car

To sell your car, you’ll need to pay off the outstanding finance, so it’s important to know how much your car is worth. Head to motorway.co.uk to get a free, instant valuation of your car, or use our car value tracker to stay on top of your car’s ongoing value, so you can choose the right time to sell. Our valuations are based on current data from our nationwide used car marketplace.

Step 3: Prepare your car

Once you’ve got your settlement letter, you can prepare your car for sale. Start by gathering all the documents you need, including the V5C logbook for your proof of ownership, the service history, and MOT certificates if the car is older than three years.

You should also give the car a clean to help it look its best, and dig out the spare key, if you have one. If you don’t, you may get a lower offer for your car to cover the cost of making a new key. You might also want to repair any minor damage, such as scratches or small dents, to help get a higher offer in our auction.

Step 4: Sell with Motorway

Now you’re ready to sell! Create a detailed profile of your vehicle using our handy app, including taking high-quality photos and highlighting any damage around your car. We’ll guide you through the process and, once we’ve assessed your vehicle’s condition and history from your completed profile, we agree a reserve price with you. This may differ from your original estimate to take into account the specification, condition and history of your car, but we’ll talk it all through with you. Plus, there’s no obligation to list if you don’t like the price.

Step 5: Confirm the sale

We find your best price by listing your car in our daily auction, with bids from over 7,500 verified dealers in our nationwide network. Choose to accept your highest offer and the dealer will get in touch with the next steps. Make sure to have your settlement letter to hand when you organise the collection.

When the sale is confirmed, the dealer will arrange to collect your car for free at a convenient time for you. They’ll check that your car matches the profile before arranging a fast, free payment into your bank account within 24 hours.

Step 6: Settle the outstanding finance

Once you’ve sold your car with Motorway, your winning dealer will clear the existing finance directly with your lender. Any surplus goes straight into your bank account. All that’s left to do is organise a collection at a time and place that suits you.

If your car is in negative equity, you’ll need to pay the difference of the car’s value. You’ll usually make this payment directly to Motorway and we’ll finalise the paperwork for you. On some occasions, you may pay directly to your winning dealer, but we’ll explain the process for you when you sell.

And then you’re done! The finance agreement is paid off, your car is sold, and you’re free to look for your next exciting car purchase.

FAQs

How do I get a settlement figure for my car?

You’ll need to request a settlement letter from your lending company, which will show the remaining settlement figure along with other important information about ending your finance agreement early, such as any fees you have to pay.

Most lenders should allow you to sell (providing you fully repay the finance at the time of sale), but you should confirm your policy before proceeding. But once you have that, the steps to selling with Motorway are pretty much the same as any other vehicle.

Is it illegal to sell a car with outstanding finance?

The car is legally owned by the finance company until the loan is fully repaid, so selling it privately without settling the finance is illegal and could be considered fraud.

However, it is fully legal, safe and easy to sell your car with Motorway, even with an existing finance plan. Our network of verified dealers are allowed to settle the finance for you when you sell. The finance agreement is paid off, your car is sold, and you’re free to look for your next exciting car purchase.

How do I transfer ownership of a car with outstanding finance?

Regardless of your finance agreement, the registered keeper on the car’s V5C logbook is still you. As such, transferring ownership is the same as any other vehicle.

You can update the registered keeper online by visiting the DVLA website – you just need the 11-digit reference number from your existing logbook. When you sell with Motorway, your car will be bought by a registered motor trader. Select this option and enter the dealer’s details to register the new keeper.

What is negative equity?

Negative equity is when the money you sell your can for is less than the remaining balance you owe. In this case, you will need to pay the difference yourself.

Positive equity is when the money you sell your car for is more than the remaining balance you owe, so there is extra left for you. In this case, you get paid the extra right into your bank account.

If you fail to sell your car for more than the remaining finance, you’ll have to cover the shortfall yourself. Here at Motorway, we can help you with that, too – in the majority of sales, you simply pay the difference to us, and we’ll combine it with the dealer’s payment in order to settle your contract with the finance company. Job done.

Ready to get started? Head to Motorway today for your free, instant valuation.