More and more car buyers are using finance schemes for both new and used cars. But what if you want to sell the car before you’ve finished paying off the full amount?

Let’s start with the most important thing you need to know:

It’s legal to sell a car with finance outstanding on it, but only if you tell the buyer. If you don’t, that’s illegal.

The car isn’t yet owned by you—it’s owned by the finance company. It’s not yours to sell. But there are ways to settle your finance and sell the car. Today we clear up the 9 FAQS we hear most here at Car Planet regarding selling a car with outstanding finance on it.

1) Can I sell my car with outstanding hire purchase finance?

You cannot sell a car with outstanding hire purchase (HP) finance. The lender is the legal owner until you’ve settled the finance.

If your car has outstanding HP finance, you need to end your HP agreement early. Contact your finance company and request a settlement figure. Once you receive that, you have a set time to pay it off. Once you’ve done so, the car is yours to sell.

2) Can I return my car?

You should be able to return the car if you’ve paid off less than half your agreement’s total cost, as long as you repay the remaining instalment so you’ve paid for half the car’s value.

If you’ve already paid more than half the car’s total cost—which should include accumulated interest and additional fees—you probably can’t return it. But check your contract for confirmation.

3) Will I have to pay an early exit fee on a hire purchase agreement?

When it comes to early exit fees, most contracts specify that you’ll pay 1% of your outstanding total, or 0.5% if you’ve got less than 12 months left on it. You probably won’t have to pay interest, although some contracts require you to pay interest rather than charges if you’re paying less than £8,000.

4) Does my hire purchase agreement have a voluntary termination clause?

If your HP finance agreement includes a voluntary termination clause, you should be able to return the car without having to make any additional payments. This shouldn’t affect your credit rating. Just remember that voluntary termination is usually offered only if you’ve paid at least half the total cost.

5) Can I sell my car with outstanding personal contract purchase finance?

Until you’ve repaid your personal contract purchase (PCP) agreement or paid a settlement figure, you can’t sell the car.

Check your contract for early exit fees and voluntary termination clauses. You’ll usually have two options:

1. Pay off the PCP agreement early and sell the car once you’ve done so. This may cost less than continuing with the monthly payments.

2. Return the car. You can do this if you’ve already paid off half the agreement (including fees and interest). And remember, you might be able to top up the difference in a final payment.

6) Can I end the finance term early?

You can sell the car if you settle the finance agreement first. You have the right to end the agreement at any stage. And if you took the finance out after February 2011, when you started the policy you’ll have been given all the details regarding your and the lender’s rights.

First, contact the lender and ask for the settlement figure. This is the sum of everything you need to pay to end the finance agreement. It may include various charges, as well as an early exit fee on top of the basic amount owed. The lender will also provide a settlement date, by which the payment must have been made. If you don’t pay by this date, you’ll need to start the process again by requesting a new settlement figure.

Once you’ve paid off the necessary amount, you’ve settled the deal. You’ve bought the car from the finance company, and it’s yours to sell. Just remember that once you’ve made the payment to settle the loan, you can’t change your mind.

7) Can I sell my car to pay off finance?

This might sound good in theory, but remember, you can only sell the car once you’ve settled the finance agreement. And of course, you can only do that if you have access to a lump sum that will enable you to do so.

Alternatively, you can sell the car as part of a refinancing deal. But given that you may be charged for ending the finance agreement early, the car may end up being worth less than the settlement figure. That would mean you’d be left in negative equity. In turn, that would mean that even if you sold the car, you could still be left out of pocket. Talk to your lender to find out all the costs involved in settling the finance.

8) Can I sell my car while I’m paying off a loan?

Paying off a loan is an entirely different situation to paying off finance. That means you can sell your car while separately paying off a loan.

A finance deal is secured against the car, but that type of link doesn’t exist with personal loans. With a loan, the car is yours from day one, and you can sell it if you so choose. But remember, once you’ve sold the car, you’ll still need to finish paying off the loan.

9) Do I need to do all this work myself?

You may be able to sell the car with outstanding finance as part of a refinancing deal for your next car. But before you do so, find out if your current car finance is in negative equity. To do so, you just need to get a settlement figure from your lender, as well as a value for your current car. If it’s lower than the settlement figure, you’re in negative equity. Then you’ll need to weigh up whether it’s worth hanging on to the car for a while longer in your current finance agreement.

If you go ahead with refinancing, you can start looking for a new car. Then you can approach a broker or lender to discuss refinancing options. If you’re approved for refinancing, your new finance deal will include the cost of the settlement figure to pay off the existing finance along with the loan amount for your new car. If you decide to part-exchange while upgrading your car, the part-exchange value will be deducted from the overall cost of your borrowing. And if you’re looking to buy a secondhand car that’s guaranteed to be safe, reliable and totally roadworthy, well—you’ve come to the right place!

Car Planet are experts in used cars in Watford and Hertfordshire. Our virtual viewings mean you can check out a car from the comfort of your own home, or you can come in and view our cars in person. Every car goes through a thorough 150-point check to ensure it’s totally roadworthy. We’re transparent, too: we always display the details of a car’s imperfections. We care about sustainability, which is why we plant a tree for every car we sell, and we provide a 7-day money-back guarantee to any customer who isn’t absolutely satisfied with our service. With our competitive finance deals and part exchanges, you’re sure to find what you need, so check out our selection of secondhand cars today and let’s get the ball rolling!