Can I scrap my car with outstanding finance?

Can I scrap my car with outstanding finance?
10th June 20205 min read

If you have not paid off all of the outstanding debt on your car, then you cannot scrap it. Although there are a few exceptions to this rule, the law states that any financing options used to purchase a car have to be fully paid off before you can sell it, and that includes selling it for scrap. When you have outstanding finance on a car, although you can use the vehicle, it does not belong to you. Instead, it belongs to the moneylender. That means selling a car on finance when there is still a debt to pay means that you are trying to sell something that doesn't belong to you. If you're thinking about selling a car still on finance, here's what you need to know.

Who Is The Legal Owner of a Car on Finance?

Car financing comes in a variety of forms, and whether you have taken out a hire purchase agreement, a credit sale, or a lease, the fact is that you do not own that car until all of the payments have been made. If there is outstanding finance on a car, then it is not yours to sell. There are some exceptions to this rule. For example, if you take out a bank loan that you have used to buy a car, then the vehicle will belong to you. As such, you can sell at any time, although you will, of course, still have to pay back what you have borrowed from the bank. If you use an overdraft to buy a vehicle, then you are also allowed to sell your car for scrap.

How to Sell a Car With Finance

If you do have outstanding debt on your car, then you need that debt to be settled before you can sell it for scrap. Remember that there is often a fee to settle a debt early. You may even find that the finance settlement is going to cost you more than the value of the car. Some scrap dealers will take on the financing so that a sale can be made, but this is very much on a case by case basis. In situations where you cannot afford to finish paying off your debt to the lender, then you have no choice but to simply continue making your regular payments until the debt is cleared and the car becomes yours. If you do find a scrap dealer who is willing to buy your car for scrap despite it being on finance, then you can be sure that this is a bad decision. No reputable scrap buyer will accept a vehicle with outstanding debt still attached to it.

How to Sell a Car With Finance

Can You Go To Jail For Selling a Car on Finance?

Lots of car owners have asked themselves is it illegal to sell a car with outstanding finance, and the simple answer is that it is. The only way to sell a car that still has finance outstanding is to settle the debt first. However, the question of can you go to jail for selling a car on finance, the answer is generally no. Mistakes can happen, especially in the stressful times of having to scrap a car. But the only reason that you could face prison is if you intentionally plan to defraud your insurance company. In all other cases, selling a car on finance will be more likely to be a civil matter between you and the person that you sell it to. So while you won't go to jail, you can be sued by the finance company and the buyer, and you will have to pay all that you owe, often with an additional fee included.

What Happens if I Sell a Car with Outstanding Finance? 

If you have unknowingly bought a car that has outstanding finance still to pay, and you then try to sell the car on again, then there's a good chance that you will get a police visit. This happens surprisingly often, which is why it's so important to check the finance history of a car before you buy one. If the worst does happen and you find that you have accidentally sold a car with outstanding debt, then all you have to do is show that you were acting in good faith. In the vast majority of cases, you will not face any repercussions. The person that you sell the car to may also be allowed to keep the vehicle, as long as they too can prove that they bought it in good faith. In many cases, though, the finance company that is owed will want to repossess the vehicle, and that could mean a court case. The buyer will have spent money on the vehicle, and if it is repossessed, then they have nothing to show for the expense. Of course, if you sell a car knowing full well that there is outstanding finance on it, then you are committing fraud, and that can have serious repercussions.

What Happens if My Car is Written Off and it's on Finance? 

If you have an accident that means that you can no longer use your car, but you still have outstanding payments to make, then things can get complicated. A lot will depend on what type of financing you have and how much you have outstanding. The value of the car will also have to be taken into account. If you have Guaranteed Asset Protection Insurance, then you will be in a much better position. Unfortunately, if a car is written off, but you still have payments outstanding, then you will have to pay back what you owe, even if the car is unusable. That's a lot easier if you have a second-hand car rather than something brand new that you've only had a short time. It's always smart to talk to your insurance company if you have an accident that writes your car off. You may find that they will pay off your outstanding debt out of your policy payout.

How Much Finance is Left on My Car?

If you're planning to scrap your vehicle, then you need to know how to check for outstanding finance on a car. Checking the history of a car is always important, and you can use the HPI website to check for potential financing issues before you buy or sell a car. 

Selling a car for scrap is often a very simple process, but it is made a lot more complicated if your car has outstanding finance. Make sure that you know exactly where you stand and how much you owe before starting to take steps towards scrapping your vehicle with outstanding debt.

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