Sponsored: everything you need to know about selling your financed car

Used-car marketplace Motorway explains everything you need to know about selling a car on finance.

Over 90% of new cars in the UK are bought on PCP and HP finance each year, but very few motorists know they have the right to sell their car before the end of the contract.

Here's all the info you need if you're thinking of selling a financed car.

Can you sell a car on finance?

Yes, you can sell your car on HP and PCP finance, including when there is outstanding finance.

You can never sell a car you’re leasing, however, because the monthly payments you make do not build up equity, as they do in the cases of HP and PCP.

Under HP finance agreements, your total debt is divided into equal monthly instalments.

When it comes to PCP, though, a large portion of the debt is saved for the end of the contract, when it can be paid as a ‘balloon payment’ to secure full ownership of the car.

PCP is overwhelmingly popular now, with well over 90% of all new car purchases in the UK in 2022 financed this way.

Its popularity is down to its seemingly affordable terms: the deposit is typically lower than in an HP agreement, the monthly payments are lower, and the repayment term is sometimes shorter.

However, there are mileage limits to PCP which can increase the likelihood of having to pay extra wear-and-tear charges at the end of your contract.

For a full breakdown of the steps to sell a financed car, read on.

Can I sell my car with outstanding finance?

Yes – if you’ve requested a settlement letter from your lending company, and you accept an offer from a dealer who is willing to pay off the outstanding finance either directly with your company, or through you (if both parties agree to that).

Unfortunately, if you fail to get an offer for your car that covers the remaining finance (and you still want to sell) you'll have to cover the shortfall.

Who owns my financed car?

Under both PCP and HP arrangements, the registered keeper on the car’s V5C logbook is you, however, the legal owner is the finance company.

Legally, you can’t sell your financed car until you have gone through the steps to notify your lender properly and arrange the settlement of the balance.

What this means is that you can either:

Wait until you’ve paid off your financing contract, and sell your car once you own it in full

Request a settlement letter from the company, then sell your car to a dealer who will clear the outstanding balance directly with the company, paying you the surplus (if any)

You might decide that selling before the balance is fully settled is the right move for you, especially if you track your car’s ongoing value and find a particularly good time to sell, based on the market value of your model.

If you want to stop paying for your financed car, and you’re happy to give it back rather than sell it on, you can also use your voluntary termination rights.

This is a consumer protection built into finance contracts to avoid motorists defaulting on car debt.

Is my car in positive or negative equity?

If your current car’s value is worth more than the resettlement figure, you have positive equity.

The inverse – when your resettlement figure is higher than the car’s valuation – is negative equity.

At the outset of a PCP contract, you typically agree on a Guaranteed Minimum Future Value (GMFV).

This works as a stabiliser for your car’s valuation – your lender won’t quote your car’s value below this number at any point.

So, you can keep checking your debt settlement figure against this number to ensure you’re still in positive equity.

Steps for selling a car on finance

Step 1: Get a settlement letter

Contact your finance company to advise them that you're considering selling your car.

Ask them for a settlement letter. Do not attempt to sell your car without doing this step first.

While most lenders should be amenable to a sale (provided you fully repay the finance at the time of sale), you should confirm their policy before proceeding.

Check your financing contract to be sure that your lender doesn’t charge a fee for early settlement.

Note: Settlement figures from financial institutions will have an expiry date attached.

If you do not sell your car before this date, you'll need to request a new settlement figure before proceeding.

Step 2: Value your car

When you eventually sell your car, you’ll need to clear the outstanding finance – hopefully, with the proceeds of the sale and not out of your own pocket.

So, the logical second step is to get a trusted valuation for your car, so you know you can fetch a good price when you sell.

Use Motorway’s Car Value Tracker to stay on top of your car’s ongoing value, so you can pinpoint the right time to sell.

Step 3: Prepare your car

Complete the following pre-sale checklist to ensure you get an offer as close to your car’s full valuation as possible. You will need to gather the following documents:

V5C logbook document – for proof of ownership
Service history – a full service history will lead to better offers for your car
MOT certificates – ensure you have a copy of your current certificate
Settlement letter – remember, this is key to selling your financed car

And prepare your car as follows:

Clean – it’s worth paying for a full clean to ensure your car is looking spotless
Minor repairs – scratches and dings can decrease your buyer’s offer when they inspect your car

Dealers also favour cars with a spare set of keys available, so it’s a good idea to have those handy.

Step 4: Get an offer

If you’re selling with Motorway, upload your car’s details to the platform to enter the online daily sale, and wait for your best offer.

If you’re selling to an instant car-buying company or dealer, follow their process to get an offer for your car. Make sure you make it clear your car has outstanding finance.

Step 5: Confirm the sale

If you’re selling to an instant car-buying company or dealer, they may wish to inspect your car and documents in person before releasing funds to settle the finance and conclude the sale. They will either:

a) collect your car at your home address
b) ask you to deliver it to a local hub

If you’re selling with Motorway, a representative from the dealership buying your car will come to you to give the car a final check over and drive it away.

Make sure to have all the key documents listed in step three.

Step 6: Settle the outstanding finance

The process of settling your outstanding finance will vary depending on both your finance provider and the dealer buying your car.

Some car buyers will deal directly with your finance company to settle the outstanding balance, while others may release funds to you and leave it to you to settle the finance with your lender.

Step 7: Complete the sale

With the car sale and finance settlement all in order, you can complete the necessary paperwork with the buyer (a dealership or marketplace such as Motorway) to conclude the sale of your car.

Step 8: Receive the surplus

If the sale value of your car was greater than the value of outstanding finance, you'll receive the balancing payment from your car buyer after completion of the sale.

Step 9: Feedback to your lender

There are many reasons why you might want to sell your car during the term of your finance agreement.

For example, you might simply want to upgrade to the latest model.

But if you're looking to sell as you are struggling to meet repayments, then always speak to your lender to inform them of your situation.

It’s important they understand the affordability of their products.

The best way to sell your financed car

If you’re thinking about selling your financed car quickly and easily, at Motorway we offer a simple – and completely free – method of getting the best price when selling, whatever the model.

For financed cars, all we need to get started is to see the settlement letter from your finance company.

Enter your reg on the homepage to be provided with an instant estimated sale price based on up-to-the-minute market data.

We’ll then ask you a few easy questions about your car and guide you through the photos you need to take to complete your vehicle profile. It can be done right from your phone – in a matter of minutes.

If you choose to enter your car into a daily sale, it will be shown to our nationwide network of more than 5,000 verified dealers looking to add to their stock of used cars. Interested dealers will then compete to buy your car, offering you their best price.

In as little as 24 hours you will receive your best offer – and, if you choose to go ahead with the sale, your car will be collected for free by the dealer and the money will be quickly and securely transferred to your bank account.