Thinking about selling your car but worried about the outstanding finance? Selling a car with unpaid finance can lead to several legal and financial consequences. It’s crucial to understand the implications before proceeding with the sale. In this article, we’ll explore what happens if you sell a car with outstanding finance and how it can affect you.
Understanding Outstanding Finance
Before delving into the consequences, let’s understand what outstanding finance means. When you purchase a car through a finance agreement, such as a hire purchase or personal contract purchase, the financing company technically owns the vehicle until you repay the loan in full. Until then, the finance company has a vested interest in the car.
Selling a Car with Outstanding Finance
If you decide to sell a car with outstanding finance, you must first obtain permission from the finance company. Selling a car without notifying them is illegal, as you don’t have the legal right to sell the vehicle. The finance company needs to be aware of the sale and have the opportunity to settle the outstanding amount before transferring ownership.
Here’s what typically happens when you sell a car with outstanding finance:
1. Contact the Finance Company
Inform the finance company about your intention to sell the car. Provide them with all the necessary details, including the potential buyer’s information and the agreed sale price.
2. Settlement Figure
The finance company will provide you with a settlement figure, which is the amount needed to clear the outstanding finance. This figure includes the remaining loan balance, interest, and any additional charges.
3. Paying Off the Outstanding Finance
Once you receive the settlement figure, you must pay off the outstanding finance using the proceeds from the car sale. Ensure that the payment is made directly to the finance company to avoid any complications.
4. Transferring Ownership
After settling the outstanding finance, you can transfer ownership to the buyer. The finance company will issue a letter or document confirming the settlement, which you must provide to the buyer as proof of clearance.
Consequences of Selling a Car with Outstanding Finance
Selling a car without settling the outstanding finance can lead to severe consequences:
1. Legal Consequences
If you sell the car without informing the finance company or obtaining their consent, you’re breaching the finance agreement. This can result in legal action against you, including fines and penalties.
2. Repossession of the Car
The finance company can repossess the car if you fail to settle the outstanding finance. They have the legal right to reclaim the vehicle as it technically belongs to them until the loan is fully paid off.
3. Negative Impact on Credit Score
Selling a car with outstanding finance can negatively impact your credit score. If the finance company repossesses the car due to non-payment, it will be recorded on your credit report and can make it difficult to obtain credit in the future.
4. Potential Legal Action by the Buyer
If you sell a car with outstanding finance without informing the buyer, they may take legal action against you to recover their losses. This can lead to additional financial and legal complications.
Conclusion
Selling a car with outstanding finance can have grave consequences, including legal action, repossession, damage to your credit score, and potential legal action by the buyer. It’s essential to follow the correct procedures, inform the finance company, settle the outstanding finance, and transfer ownership legally. Always prioritize transparency and honesty to avoid any future complications and maintain a good reputation in the automobile market.
