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It's not uncommon for cars to have outstanding finance. However, if you're buying second-hand, this presents a new challenge: ensuring that your car is genuinely owned outright. Indeed, there are many potential complications of buying a car that has finance left.
Given this thought, the importance of checking there is no outstanding finance left on your car before purchase is crucial. Fortunately, there are several things you can check before handing over money. And, while they might seem simple, they could potentially save you thousands in the long term.
It's easy to assume that outstanding finance on a car isn't that much of an issue. After all, many people assume - surely this means that, if you pay back the remainder, you've sorted it? Well, while that might sound obvious, the reality's much more complex.
At the end of the day, if a car has outstanding finance, the keeper does not officially own it. In this case, the person selling the car legally cannot do so, as it's not theirs to give away. In other words, even though you may have paid for the car, the finance company still legally owns it.
This opens up several issues. In some cases, the lender may simply ask you to pay off the finance value. However, in worse cases, the lender may not give you this option at all; in such scenarios, you'll be left thousands out of pocket and without a car to show for it!
In some cases, a seller may sell the car without paying off its full value to be unscrupulous. However, this isn't a hard rule, and it's also not uncommon for sellers to genuinely not realize. So, don't assume the car is fine on finance, even if you know the seller personally; it's always worth double checking, just to be sure (and to avoid any awkward conversations).
Car financing may sometimes be a tricky topic to broach. However, it's an essential part of your due diligence checks when buying second-hand. There are two main ways to go about this: the direct route and the check you can run at home.
Ideally, the seller will understand their responsibilities regarding ownership and will be upfront if there's outstanding finance. Given this thought, the first check is obvious: just ask. If the seller does know they have outstanding finance and are honest about this, it'll save several minutes of hassle.
Unfortunately, though, checking with the seller is only helpful if they confirm there is finance. In contrast, if they say the car doesn't have any financing outstanding, this could mean one of three things:
Alas, without a clear way to tell which of these three options is correct, it's always best to run a car history check. Don't worry. These only take a few minutes and you can run one for free; or, for just a few pounds, you can upgrade to an even more comprehensive assessment.
So, you're not sure if there's outstanding finance or not. But how do you run a car history check, anyway? Most people assume this must include a lot of digging, phoning the relevant authorities, and the like. In reality, though, all you'll need is an internet connection and the number plate of your chosen car!
Simply use our car finance check tool and select your preferred plan — typically a free or full version. Then enter the registration plate and wait a few moments. And that's it. No, really — that's all there is to it.
This will then bring up a wealth of information about the car, including finance status and so much more.
Alongside outstanding finance information, many vehicle history reports will also highlight stolen vehicle records, insurance write-offs, MOT history, ownership changes, and mileage discrepancies. Together, these checks can provide a much clearer picture of the vehicle's history before you buy.
Discovering outstanding finance doesn't necessarily mean the deal is over. However, it does mean you should proceed carefully and make sure the issue is resolved before handing over any money.
In some cases, sellers may already have a settlement figure from the finance company and intend to clear the balance as part of the sale. If so, it's always sensible to request proof that the agreement has been settled before completing the purchase.
If the seller is unable to explain the finance agreement or seems reluctant to discuss it, it may be best to walk away. There are always other vehicles available, and it's rarely worth risking thousands of pounds on a questionable transaction.
Before buying a used car, it's worth understanding the different finance agreements that could still be attached to the vehicle. The most common are Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements.
In both cases, the finance company generally remains the legal owner of the vehicle until all payments have been made. This means a seller may have been driving the car for years and still not legally own it outright.
There are also personal loans used to buy vehicles. These are usually less problematic because the loan isn't secured against the car itself. However, unless you're completely certain how the vehicle was purchased, it's always worth carrying out a finance check for peace of mind.
It's really that easy. So, there's no room for compromise here; for just a few moments of time, you can potentially save thousands of pounds on a very costly mistake.
Buying a second-hand car can be a fantastic way to save money, but it's important to carry out proper checks before committing to a purchase. Hidden issues such as outstanding finance aren't always obvious, yet they can have serious consequences for an unsuspecting buyer.
Fortunately, checking a vehicle's finance status takes only a few moments. By running a quick vehicle history check, you'll gain valuable insight into the car's background and can buy with greater confidence.
Simply enter the registration number into our outstanding finance check tool. It can quickly reveal outstanding finance information alongside other important details such as stolen status, write-off records, MOT history, mileage discrepancies, and even the vehicle's service history.
Taking a few minutes to run these checks before purchasing could potentially save you thousands of pounds and a major headache further down the line.