Last updated September 22nd, 2023
However, it is important to be aware that someone who has a car with outstanding finance doesn’t legally own that vehicle – and therefore is not legally entitled to sell it until the debt is settled.
If you unwittingly buy a car with outstanding finance, this can cause you undue hassle. For your peace of mind, it is a good idea to carry out a car finance check before committing to a purchase. If you learn that a car still has a finance agreement attached, do not buy it!
In this guide, we will cover what is meant by ‘outstanding finance’, the potential consequences of buying a vehicle with unpaid finance – and the steps you can take to release a vehicle from an existing financial commitment.
If a car has outstanding finance, this means it has outstanding payments from an active finance agreement. Typically, these repayments are part of a Hire Purchase (HP) or Personal Contract Purchase (PCP) finance agreement.
Visit our guide ‘Car finance options explained’ for a more detailed explanation of these car finance options.
Thinking about financing a car? Use our free car finance calculator to work out the cost.
You should avoid buying a car if it has outstanding finance attached, as the car will still be the property of the finance company, which means the seller does not have the right to sell the vehicle.
Therefore, if you do purchase a vehicle with an outstanding finance agreement, you run the risk of incurring a significant financial loss, because the company could repossess it if the finance commitments are not met. You could potentially pay for a car - only to have it repossessed, leaving you without a car (and the cash you paid for it).
Whilst no one wants to discover they have unwittingly bought a car with outstanding finance, this can happen. So, it’s important to know what to do in this scenario.
Firstly, rest assured you have done nothing wrong - and you are protected by ‘good title’.
‘Good title’ is what you gain when you buy a car with outstanding finance but have no knowledge of the existing financial agreement.
(If you are contacted by the finance company that owns the car, you should stay in touch with them and work with them to resolve the matter, as this shows honest communication.)
However, you should never knowingly buy a car with outstanding finance, as if the finance company can prove you were aware of the finance agreement at the point of sale, you will be just as culpable as the seller – and the company will have the right to recover the vehicle.
To release a car from a finance commitment, you could settle the payment with the finance company. (However, this isn’t money that you need to pay, so we would advise against this.)
Instead, to further back up your claim of ‘good title’, you should provide evidence of the car advertisement and any communications with the seller to help prove your lack of prior knowledge.
The law is simple: if you are the legal owner of the car in terms of the finance deal, you can sell the car. If you are not, you can’t sell it.
To avoid breaking the law, you can arrange a pay-off deal with the owner of the car and then sell it. Alternatively, you may be able to find a voluntary termination clause that will allow you to cancel your car finance early.
In most circumstances, it is illegal to sell a car privately with outstanding finance still attached. You will usually need to settle any outstanding finance before you have the right to sell the vehicle. To get started, you just need to request a settlement figure from the finance company.
Use our car valuation tool to find out how much your car is worth. You can use the money raised from the sale of your car to pay off the settlement.
Alternatively, you have the option to sell to a car buying service, such as webuyanycar. We can settle any outstanding finance on your behalf, making the selling process easier. For a full explanation of the process to follow, please read our guide ‘Selling a car with outstanding finance’.
Before buying a car, you should run an outstanding finance check on the vehicle to ensure there are no surprising financial commitments attached.
The online tools that can tell you a car’s finance status are not always free, but if you are serious about buying a vehicle, it is worth knowing whether it is subject to a finance agreement.