What may be a surprise is the fact that a
financed car cannot be legally sold until the debt is paid in full. Even the
smallest amount, such as £50, prevent a
legal, binding private sale. This is illegal, whether you are or are not aware
of the debt owed.
If you decide to purchase through the dealership, the situation changes, thanks to dealer/ lender arrangements and
·First, you need to determine
the exact amount owed. This is referred to as the settlement figure.
·Second, contact the finance
company and make them aware of your plans to purchase the car. Ask them how
much it would cost to settle the car, allowing you to legally purchase it.
Also, ask about any terms, policies, procedures, and conditions you will need
·Be aware that most finance
companies do require that the full amount owed be paid by the person named in
the finance agreement.Occasionally, you
may find a company that will allow you to pay the finance outstanding and the
rest of the purchase price to the seller. This is entirely up to the lender.
Use the following link for information about stocking loan definitions and the steps needed when buying a car from a dealership with money owning form a lending company.
So, what happens if the selling price is
less than what is owed on the car?
Equity Car Finance
This is the term used to explain the situation when the car’s market value (or selling price) is lower than the amount owed on it.
For example, if a car has a selling price
of £8000, but outstanding finance of £10000, the lender must be paid the full £1000. In this case, the buyer would directly pay the lender £8000 and the seller would directly pay the additional £2000 to the lender.
Watch this explainer video on handling outstanding finance correctly:
Finance Settlement Letter
of who pays off the finance (you or the seller), the finance company will need
to provide you with a settlement letter. This letter should include the
vehicle’s details and the fact that the car has no further interest owed on it.
You should put this letter in a safe place just in case you were to need it in