Selling a car on finance? In our guide, learn the crucial steps to protect your credit and avoid debt.
What This Guides About
Car Finance Statistics In The UK
Almost 90% of car owners in the UK finance their new vehicles. It’s slightly lower for used but still a significant percentage.
That doesn’t account for personal loans taken out then and presented to a dealer as a cash purchase, so the figures may be higher.
The average term of a car finance loan is between 4 and 5 years, or on PCP deals 3 years.
So when it comes time to sell, many find they have not yet reached the end of their finance agreement, necessitating the settlement of the outstanding balance.
In theory, it’s simply a matter of getting a valid settlement letter from your finance company and passing it to the buyer to clear off for you, In practice selling a car on finance needs careful management to make sure you are not left
Selling a Car on Finance: What You Need to Know
Dealer Settlements: They typically handle the finance settlement when you trade your car into a dealer. However, based on over 35 years of experience in and around PLC car dealerships, I’ve observed that dealers often wait until the last day the settlement quote is valid to pay off the balance.
This practice benefits their cash flow by effectively giving them a period of free stock. But be cautious—this delay can lead to significant issues if not managed correctly.
Risks of Unsettled Finance
- Legal Responsibility: Until the dealer settles the finance, you are legally responsible for the debt. If you cancel your direct debit and the dealer fails to pay on time, missed payments could negatively impact your credit score.
- Dealer Bankruptcy: Should the dealer face financial difficulties and go bankrupt before settling your finances, your legal recourse would be limited, involving potential negotiations with the liquidator about the return of your car or reimbursement.
- Faults in Part-Exchanged Vehicles: If faults are discovered in your part-exchanged vehicle after the deal, dealers might use the unsettled finance as leverage to seek compensation, further complicating the transaction.
Best Practices for Selling a Car on Finance
Proof of Payment: Always ask for proof of payment from the dealer. This should be faster than a check or BACS, as electronic payments are harder to cancel or withdraw. This step is crucial as it ensures that your financial obligations are conclusively settled before you transfer ownership.
Selling A Car On Finance Privately
Selling on Finance privately requires transparency and meticulousness:
- Direct Payment: Have the buyer pay the finance company directly and provide proof that the funds have been sent.
- Finance Clearance: Contact your finance company to confirm receipt of payment. Be aware that finance companies often have different teams handling customer accounts and day-to-day banking, which can delay confirmation of payment clearance.
Read this if you are considering selling your car on finance privately
https://www.webuysupercars.com/selling-a-car-privately-how-to-stay-safe/
Frequently Asked Questions
What Can I Do If the Dealer Doesn’t Settle My Finance?
If you discover that the dealership has not settled your finance agreement as agreed, the first step should be to contact the dealership directly. This oversight may be due to an administrative error, and the dealer can usually rectify it quickly once notified. If your initial contact does not resolve the issue, consider the following steps:
- Documentation: Gather all related documents such as your finance agreement, proof of payment, and any communication you’ve had with the dealer. This will support your case should further actions be needed.
- Visit in Person: Arrange a meeting with the dealership management. A face-to-face discussion can often be more effective in resolving disputes. Ensure you explain the issue clearly and provide all necessary documentation to support your claim.
- Escalate the Issue: If the dealership does not respond positively or if you suspect more serious problems such as financial instability at the dealership, escalate the issue. Contact the finance company that holds your loan to inform them of the situation, as they may need to intervene directly.
- Legal Advice: Consult with a consumer rights lawyer or a financial advisor. Legal advice can be crucial, especially if the dealer is having financial difficulty or if fraudulent activity appears to be involved.
- Demand the Return of the Vehicle: If it becomes clear that the dealer cannot settle the finance due to financial difficulties and your legal advisor agrees, you may demand the return of your vehicle. Until the finance is settled, you are still the car’s owner.
- Report the Issue: You can also report the dealership to consumer protection agencies or industry regulatory bodies. They can offer guidance and, if necessary, take action against the dealership for non-compliance with financial agreements.Financial Ombudsman Service: our homepage (financial-ombudsman.org.uk)
Taking these steps should help in resolving issues with a dealership that hasn’t settled your finances. Always keep records of all interactions with the dealer and the finance company, as these documents can be crucial in resolving disputes effectively.
Conclusion
Understanding the intricacies of selling a car on finance is crucial to avoid financial losses and legal issues. Always ensure all debts are cleared, and proofs are obtained when transferring vehicle ownership. If you have additional questions or need further clarification, comment below, and we’ll enrich our guide based on your feedback.