Can You Sell A Car With Finance On It? Everything You Need To Know

Understanding Legal Ownership And Car Finance

When a vehicle is under a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement, the finance company legally owns the car. While you are the registered keeper and are responsible for the vehicle, you do not have the legal right to sell the asset until the settlement figure is paid.

Key Car Ownership Facts

• The Lender: Holds the legal title and ownership of the vehicle.
• The Driver: Has the right to use the vehicle but cannot transfer ownership.
• The Sale: Is only legally valid once the finance company’s interest is cleared.

The 4 Steps To Selling A Financed Car

1. Request A Settlement Figure: Contact your lender (such as Marsh Finance) to get a written statement of the exact amount needed to clear the loan. This figure is usually valid for 12 days.
2. Determine Market Value: Research your car’s current market value. Compare this to your settlement figure to see if you have positive or negative equity.
3. Choose Your Selling Method: Decide whether to sell to a dealer (who can settle the debt directly), part-exchange, or pay the settlement yourself to sell privately.
4. Clear The Debt And Transfer Title: Ensure the lender is paid directly. Once the payment is confirmed, the finance marker is removed from the HPI registry, and the car can be legally sold.

Three Common Ways To Settle Your Finance And Sell

Summary: You can choose to sell to a dealer or car-buying website, part-exchange for something new, or clear the finance privately before taking any next steps.

1. Sell To A Dealer Or Car-Buying Website

This is often the simplest method. Professional dealers can contact your lender directly, pay off the settlement figure, and give you any remaining balance (positive equity) in cash.

2. Part-Exchange For A New Vehicle

The dealership handles the paperwork for your old finance agreement. They will clear the debt and use any remaining value as a deposit for your next car. If there is a shortfall (negative equity), it can often be rolled into your new monthly payments.

3. Clear The Finance Privately First

You can pay the settlement figure using savings or a personal loan. Once the lender confirms the account is closed, you own the car outright and can sell it to a private buyer for its full market value.

Managing Positive And Negative Equity

Understanding the "Equity Position" is vital for a legal sale.

• Positive Equity: The car’s market value is higher than the settlement figure. (e.g., Car is worth £10,000, you owe £8,000 = £2,000 profit).
• Negative Equity (Shortfall): The car’s market value is lower than the settlement figure. (e.g., Car is worth £7,000, you owe £9,000 = £2,000 shortfall). You must pay this difference to the lender to authorize the sale.

Your Rights Under The Consumer Credit Act 1974

If you are struggling with payments or have high negative equity, you may have the right to Voluntary Termination. Under the Consumer Credit Act 1974, if you have paid back 50% of the total amount payable (including interest and fees), you can return the car to the lender and end the agreement without further charges, provided the car is in good condition.

Ready To Upgrade Your Car?

Now that you know how to settle your current finance and unlock your equity, it’s time to find your next vehicle. At Marsh Finance, we make moving into your next car seamless.

Whether you have positive equity to use as a deposit or you're looking for a fresh start with a more affordable monthly payment, our quick online application gives you a budget in minutes without impacting your credit score.

Find Out What You Can Afford Today

Take the first step toward your new car. Use our budget calculator to see your personalized finance options.

Not ready to apply? Explore our HP and PCP Finance Options to see which path is right for your next journey.

Frequently Asked Questions (FAQ)

Is It Illegal To Sell A Car With Outstanding Finance?

Yes, it is a criminal offense to sell a vehicle privately without informing the buyer about the finance or settling the debt first, as you are selling an asset that belongs to the lender.

How Do I Get A Settlement Figure From Marsh Finance?

You can request this via our customer portal or by calling our support team. We will provide a statement that includes all remaining payments and any early settlement fees.

Can I Sell My Car If It Has A Shortfall?

Yes, but you must pay the shortfall (the difference between the sale price and the settlement figure) out of your own pocket to clear the debt with the lender.

Can I Sell My Financed Car To Sites Like Webuyanycar Or Motorway?

Yes. Major car-buying services and online platforms are set up to handle financed vehicles. You simply provide them with your settlement figure, and they will pay the lender directly, transferring any remaining positive equity to your bank account.

How Long Does It Take For The Finance Marker To Be Removed After Selling?

Once the debt is settled, it typically takes 2 to 10 working days for the finance company to update the HPI (Hire Purchase Inspection) registry. During this window, the car may still show as "financed" on vehicle history checks, so it is vital to keep your settlement confirmation letter as proof.

Does Settling My Car Finance Early Affect My Credit Score?

Settling your finance early is generally viewed as positive or neutral by credit agencies. It proves you have successfully managed and closed an account. However, ensure you do not have any outstanding "missed payment" fees, as these must be cleared during the settlement to protect your credit rating.

Are There Penalties For Paying Off My Car Finance Early?

Most UK lenders charge an early settlement fee, which is often equivalent to one or two months of interest. However, because you are ending the agreement early, you will also save on the remaining interest that would have accrued over the full term. Your settlement figure will reflect both the savings and the fees.

What Is The Difference Between Selling HP And PCP Finance?

With Hire Purchase (HP), your settlement figure simply clears the remaining loan. With Personal Contract Purchase (PCP), your settlement figure includes the Optional Final Payment (often called the "balloon payment"). You must account for this larger final sum when calculating if you have positive or negative equity.

Do I Need My V5C Logbook To Sell A Financed Car?

Yes. Even though the finance company owns the car, you are the registered keeper. You must have the V5C logbook to transfer the keeper details to the new owner or dealer. If you have lost it, you should apply for a replacement from the DVLA before starting the sale process.