So you’re thinking about selling your car. Perhaps it feels a little dated, it doesn’t give you a high enough MPG or you just fancy something new. If you own your car it’s simple, you just put it up for sale online or you go to a local dealer. But the majority of cars these days are on finance.
Partly because they are such an expensive purchase the outright payment is too much for most to afford. But also, the majority of lifestyles nowadays are all done on a payment plan. Mobile phones, houses, laptops, even clothes shopping. Rarely we’re buying things outright and there is usually some sort of payment plan in place. The same goes with cars – albeit the plans tend to be longer and more expensive.
It’s natural to think that because you don’t own the car, you cannot get rid of it and enter a new deal. But this isn’t the case. While you cannot head down to your local dealer and sell a car and claim the profit, there are things you can do to get a new car. First of all, you need to know what sort of finance your car is on.
Selling a car with outstanding PCP finance
You will have a car on PCP finance if you have a balloon payment at the end of your agreement – that’s the key difference that will jog your memory and indicate which finance you have. Typically they are anywhere from £4,000 to £8,000. The reason there is a balloon payment is to keep your monthly costs down but also, you’re rarely expected to pay it, instead you return the car and take out a new finance deal with the manufacturer.
If you’re looking to get a new car with the same car manufacturer but you’re not finished paying your plan and there is still the balloon payment on top of that you may be able to get a new car. It would all depend on how much they currently value your car. If your balloon payment and the rest of your plan come to a total of £15,000 but they value your car at £13,000 you would have to pay them £2,000 to get out of the plan. So this wouldn’t include a deposit on a new vehicle.
If you’re looking to switch manufacturers it isn’t too dissimilar, you just need to find a garage that is willing to pay the total of £15,000 for your car – which is less likely because they’ll make less profit on it. Manufacturers tend to pay more for cars that are their own because they know how to make the most profit on it. But it’s always worth searching and shopping just in case.
In some cases there are options for voluntary termination but these are more common with higher purchase finance agreements.
Selling a car with outstanding HP finance
A higher purchase finance agreement is similar to PCP in that you have monthly payments, however there is no balloon payment at the end. Ultimately, this makes your monthly payments and initial deposit higher but once you finish those monthly payments you own the car outright and are free to sell it how you wish.
If you find yourself wanting to end a higher purchase finance agreement you can sometimes opt for voluntary termination. This is when you have paid over half of the instalments on the vehicle. This typically involves you handing back the car but because you’ve paid a high deposit and high monthly instalments you lose most if not all of the equity in the car – so you’re not always better off.
In order to end these agreements you need to get a settlement figure. Basically ‘how much will it cost for me to own this car’ – it is usually all of your remaining monthly payments totalled. You can request this from the finance company, pay and be done. If you’ve paid less than half of the total amount, you can pay a lump sum to bring you up to half and then go through voluntary termination through Section 99 of The Consumer Credit Act 1974.
Selling a car with outstanding PCH finance
If you have a car on PCH finance, you do not have the chance to ever own the car and therefore you cannot sell it. You are essentially renting it, so if you want out of this agreement you have to look at your cancellation clause which can be unique to you and your finance deal. Check with your car finance company on the terms of your agreement.
