Selling my car with outstanding finance

If we received a pound for every time we received an enquiry about someone stressing over wanting to sell their car with outstanding finance on it, we would be rich!

Therefore we decided to write this to put your mind at ease and show you that it’s actually a lot easier than you think.

Whether you want to sell it privately, to a car buyer or by part exchanging it, then it is possible to do, but you must make sure you are doing everything legally.

Before you can legally sell the car, you must:

– Inform the finance company and ask them for the “settlement figure” they will need from you to pay off your loan in full.

– Pay off the settlement figure, plus any early repayment fee and administration fee that the lender may charge.

(Your settlement figure is generally valid for 30 days)

Despite these costs, paying off your loan early should end up costing you less than your remaining payments would have done.

How are settlement figures calculated?

If your monthly payment is £300 and you know you still have 15 payments left to make, you might assume you’d owe £300 X 15 = £4,500.

In fact, your monthly payment includes interest, which you don’t have to pay on the remaining 15 months – as you’re paying off a car loan early.

There may be a small interest penalty of a month or two and an admin fee, but it should still be less than the sum of your remaining payments.

Your options:

Sell privately

Although possible, this isn’t always easy, as buyers might want to arrange finance or need to trade in their old car to make it possible.

Having outstanding finance is also likely to put buyers off, unless you deal with it in the right way – so always be up-front and explain to buyers that you’re paying off car finance early and have a settlement figure in writing.

If you can’t afford to pay the settlement figure yourself prior to selling your car, ask your buyer to do this when he collects it from you.

Again many potential buyers are reluctant to do this for obvious reasons, so if you can it’s always better to clear the finance and make the car HPI clear.

When your buyer comes to collect your car, either have them phone your finance company and pay the settlement figure. Once they’ve done this, speak to the finance company yourself and ask them to confirm receipt of the money, and request that they fax or email you to confirm the account has been closed.

If the settlement figure is less than the sale price of your car, the buyer will need to pay you the rest of the money in cash or via bank transfer. If the settlement figure is higher than the sale price, you’ll need to pay the buyer the difference.

Part exchange with a dealer

If you’re thinking of buying your next car from a dealer, you can ask if they’d consider taking your old one as part payment or ‘part exchange’. If they offer you a sensible figure for it, give the dealer your settlement figure letter from the finance company and they’ll arrange to pay the outstanding loan when you pick up your new car.

For example, if they were to offer you £12,000 for your old car and your settlement figure is £10000, you’d have £2000 left over to go towards your new car after paying off your old agreement (this £2000 is often referred to as your ‘equity’).

Sell to a car buyer

Car buyers such as pay £1000’s every year to finance companies on behalf of motorists who sell their car to them.

Simply bring your settlement figure along with your car and the car buyer can net off the outstanding amount and pay that directly to your finance company on your behalf. You’ll get any cash left over.

If your car is worth less than the settlement amount needed?

In order to get freedom from paying car finance every month on a car where you owe more than its worth, a car buying company such as can pay off the loan, provided you advance them with the exact amount to make up the balance.

In summary, no matter which option you wish to take, it is possible. Although it appears to be very complex, it can be a simple process.

If you need help or advice, you can give us a call and Jack will be happy to talk you through the best option for you.