Updated 17-08-2021 - Nicki Saunders

How to sell a car on finance

Over 85% of vehicles in the UK have been purchased under finance, so it is a common occurrence to find yourself in a position of wanting to sell a car that is still locked in to a contract. Contracts can vary based on the dealership, how much you can afford, and if there was a specific deal that you took advantage of. This usually means that you are locked in to a contract for the next few years. However, life changes, and whether it’s a financial situation, your needs have changed, or you simply want a different car, there’s a bit of a process to sell your vehicle if it’s still under finance. This is because technically, it’s not actually legally yours until you’ve paid it off. It can all feel a little overwhelming, so we have compiled everything you need to know, and removed all of the confusing jargon to create an easy-to-understand guide on how to sell your car under finance.

Know your agreement

There are three different kinds of agreements when it comes to car finance.

  1. Personal Contact Purchase (PCP) – This kind of agreement is becoming more and more popular over the last few years. This is when the customer can spread monthly payments over a set period of time, usually two to three years, and then have the option to buy the car at the end of the agreement by paying off the outstanding balance as a balloon payment. 
  2. Hire Purchase (HP) – This agreement is a bit more straightforward, as the customer simply pays monthly installments until the car is completely paid off (so no lump sum at the end of the contract).
  3. Personal Contact Hire (PCH) – This agreement is usually used by large businesses, and is essentially a long-term hire situation. PCH agreements are usually cheaper than a PCP or HP agreement, because you don’t pay off the car and purchase it, therefore you can never sell it.

It is important to know what kind of agreement you went in to when you originally bought your vehicle, so that you know if you can legally sell on the car. If you aren’t quite sure, simply call the dealership, and they will be able to let you know what kind of agreement you made with them.


If you have decided to update your vehicle to a newer model, you can potentially do this through the dealership with no stress about having to pay off the remainder of what you still owe. Once you have paid off about 50% of your current vehicle, you may be eligible to use your equity as a deposit on a new car. You will need to do this at the same dealership that you have an agreement with, and only they will be able to let you know what you’re able to purchase next. Simply give them a call and see what you can do, as terms and conditions will vary across the board.

Voluntary termination

Voluntary termination of the contract has been designed to protect both the lender and the purchaser. To be eligible for voluntary termination, you must have paid off at least 50% of your vehicle, including interest. Basically, what this means is that you can pay off the rest of your car in one lump sum, rather than sticking it out for the remainder of the contract.

If you have a PCP finance deal, you will have to pay off the amount borrowed, the guaranteed future value of the car, plus interest and fees. If you have an HP finance deal, you will have to pay off the outstanding amount.

Before you advertise your car, get in touch with the dealership that sold it to you to find out exactly how much it will cost you to terminate the agreement, and pay for your car in full. Keep in mind that interest and fees can apply, so you want to be absolutely certain that selling the car is exactly what you want to do, and is something you can afford.

If you opt for voluntary termination, you may have to pay an early exit fee, but you may also bypass all the interest that would have accumulated overtime. Your dealership will be able to advise you.


Life is so unpredictable; you can never know what is coming your way. All of a sudden, you may find yourself in a position where you can no longer afford the payments that used to be made comfortably. If you are selling the car because you can no longer afford the repayments, have a conversation with your dealership first. They may be able to sort out an alternative payment plan for you that accommodates your new financial situation. Lenders are experienced with this issue, so don’t be afraid to approach them and be honest about your situation. You’re not the first, and you certainly won’t be the last, and there will be a system in place for this exact situation.

You may find yourself needing to take out a personal loan to pay the car off in full before you can sell it on, which could be creating more debt for yourself. Be careful not to find a short-term fix for a long-term problem. Remember, you cannot sell the car without having paid it off.

Car-buying websites

If you cannot pay off the settlement figure, there is a loophole for selling the car, but it can come with a price. By using a car-buying website, you can sell your vehicle on to them, and they can actually pay the settlement fee in the process. Because they have the ability to do so, this comes out of your potential earnings from selling the car, and you may not get the best price for it by using the website, as opposed to doing a private sale. There are many different websites, so do your research on which ones you can trust to get the best deal.

Step-by-step process

1 – Find out how much you owe

Call your dealership or lender, and ask them to provide you with the settlement figure. They will be able to tell you exactly what the outstanding amount is for you to successfully buy the car legally, and will include all the hidden costs you may not have accounted for. Once they have provided you with the settlement figure, they will also advise you of the time frame this needs to be paid by if you decide to move ahead. Remember, you must legally own the car before you can sell it.

2 – Check the value of your car

Find out how much your car is actually going to be worth, and whether or not it is going to make sense financially to pay the settlement figure, sell the car, and buy another one. This is especially vital if you are selling due to financial strain, as you may discover that you are going to be worse-off than before. You can easily check your car valuation online.

3 – Decide how you are going to sell

If you have got this far and still wish to proceed, you must now decide if you are going to do a private sale, or use a car buying website. There are pros and cons to both of these options. With a private sale, you do not have to pay any fees for the service provided, but it can be a bit more stressful with deciphering what paperwork you need, and finding trustworthy buyers. Using a website means that you can sit back and relax while they do all the work, but you will have to pay for the services.