Here’s the big question: can you simply sell your car if it’s under HP finance? And if so, do you need to inform your finance provider? Let’s break it down to ensure you’re on the right track.
How does HP finance work?
Hire Purchase, often referred to as HP, is a popular way to finance a car. Instead of paying the full price upfront, you pay a deposit followed by monthly instalments over an agreed period.
Essentially, you’re hiring the car with the intent to purchase it at the end of the contract. But, and this is crucial, you don’t technically own the car until the last payment has been made. The finance provider retains ownership throughout the agreement.
Why you can’t sell a car under HP finance without permission
Because the finance provider still owns the car, you don’t have the legal right to sell it. It might sound a bit restrictive, but it makes sense. After all, you wouldn’t sell something that doesn’t belong to you.
In this case, until you’ve made the final payment, the car legally remains the property of your finance provider. Trying to sell it without informing them could land you in hot water.
Selling a car under HP finance without permission is considered illegal. It’s known as “fraudulent disposal of goods” because you’d be selling a car that isn’t technically yours. This could not only result in financial penalties but also legal trouble.
What happens if you still want to sell your car?
If you’ve decided that selling your car is the right move for you, there are legitimate ways to go about it.
Option 1: Settle the finance agreement early
The most straightforward way to sell your car under HP finance is to settle the agreement early. Essentially, you pay off the outstanding balance to the finance provider, and once the car is fully paid off, it’s yours to sell.
Your finance provider will be able to provide a “settlement figure,” which is the amount you need to pay to clear the finance.
Once you’ve settled the finance, the car is officially yours, and you’re free to sell it however you wish. Just bear in mind that settling the finance early may come with an early repayment fee, so be sure to ask your finance provider about any additional costs.
Option 2: Use voluntary termination
HP finance agreements come with a clause known as “voluntary termination.” This allows you to end the agreement early without having to pay off the entire balance, provided you’ve paid at least 50% of the total amount owed, including any interest and fees.
If you’ve already paid half of the agreement and no longer want the car, you can return it to the finance provider under voluntary termination. You won’t be able to sell the car yourself, but this option could save you from making further payments.
However, do note that the condition of the car matters here. If the vehicle has any damage beyond reasonable wear and tear, you could be charged for repairs.
Why it’s essential to inform your finance provider
Even if you’re considering voluntary termination or settling the finance, it’s always a good idea to inform your finance provider. In fact, you’re obliged to do so.
Your finance provider holds a vested interest in the car, so any changes to your agreement, including selling the vehicle, need to be communicated.
They can guide you through the necessary steps, ensuring you remain on the right side of the law. Plus, they may even be able to offer alternative solutions, such as swapping your current car for another one under a new finance agreement.
Can you sell your car to a dealership while under HP finance?
Some dealerships may offer to handle the finance settlement on your behalf, which can be convenient if you’re looking to sell your car quickly and seamlessly.
Here’s how it works: the dealership will offer you a price for your car, and if you accept, they’ll contact your finance provider to obtain a settlement figure.
They’ll then use the sale proceeds to pay off the finance. If the sale price exceeds the settlement figure, you get to pocket the difference. If not, you’ll need to cover the shortfall.
It’s important to make sure the dealership is reputable and experienced with handling cars under HP finance. Double-check the terms they offer and ensure everything is transparent before proceeding.
What about selling to a private buyer?
Selling a car under HP finance to a private buyer is a much trickier route. Private buyers are unlikely to want to deal with the hassle of paying off your finance, and many won’t even know that the car is still under finance.
If you do attempt this, it’s vital to be upfront about the situation with any potential buyer. However, more often than not, you’ll need to settle the finance first before making any private sale.
How to check if your car is under finance
If you’re unsure whether your car is still under HP finance, it’s always best to check with your finance provider. They’ll be able to give you a breakdown of your payments, the remaining balance, and whether you’re legally entitled to sell the vehicle.
Protect yourself and your finances
Selling a car under HP finance isn’t impossible, but it does require a bit of legwork. It’s important to follow the correct legal procedures to protect yourself financially and avoid complications down the line.
Informing your finance provider is essential – not just because it’s the legal route but also because they can support you with options and advice.
Remember, trying to sell a car without clearing the finance could have serious consequences, both financially and legally. So, always communicate with your finance provider and explore the legitimate ways to sell your vehicle.
Parting thoughts
If you’re considering selling a car under HP finance, the key takeaway is simple: always inform your finance provider.
Whether you’re settling the finance early, using voluntary termination, or working with a dealership, keeping your finance provider in the loop ensures you’re following the law and avoiding potential pitfalls.
There are legal routes available to sell your car, and while it might take some extra steps, it’s well worth it to protect your finances and avoid any legal trouble.
🚗 You might like this guide: Can a new buyer take over my HP agreement?