Should I buy a car with outstanding finance?

With more and more cars being bought on finance, it’s possible the car you’re looking to buy might have finance owing on it. What can you do in that situation?

Words by: Additional words by: Rachael Hogg First published: 11th October 2017
car finance has become increasingly important in recent years: almost 90% of cars bought by private buyers are now bought on finance. However, with schemes like PCPs, until the buyer has reached the end of the finance term and paid off all the money owed, the car doesn’t belong to them. Instead, it belongs to the finance company, which can cause problems if the ‘owner’ decides they want to sell.
Can I buy a car with outstanding finance?
In theory, no. If there is still finance owing on a car, it belongs to the finance company, so the ‘owner’ has no right to sell it, and it’s illegal. However, some people – be it a mistake or mischief – will try to sell a car before they have finished paying off the finance.
How can I find out if there’s still finance owing on a car?
Fortunately, that’s a simple thing to find out, through a car History Check. There are several out there, but Auto Trader has its own check, which you can find here.

In 2016, these checks revealed one in eight cars still had outstanding finance on it. As well as discovering if there is any finance owning, Auto Trader’s car history check will also show you if the car has ever been written off or stolen, as well as confirming the number of previous owners, its recorded mileage, and lots of details about the car, such as make, model, colour, road tax rate and date of first registration.

This isn’t the only car history check available, but when you look around for a check, do make sure the report will reveal any outstanding finance. Not all of them do.

When you enquire about a car that’s for sale, you may find some buyers show you a car history check they have performed. However, it is possible to fake a check, and that means the only way to be sure is to do your own.
What can I do if I find out finance is still owing on a car I want to buy?
Don’t buy the car. This can lead to problems and could leave you out of pocket. If you’re desperate to buy that particular car, you can ask the seller to settle their debt with the finance company, and provide you with adequate proof. Ultimately, they can only sell the car when it is theirs to sell.

Alternatively, you can negotiate with the seller to pay off that debt as part of your purchase. Knock an appropriate sum off the asking price to make up for the extra you’ll have to pay to the finance company. Second, remember you are not allowed to negotiate directly with the finance company; they will only deal with the person who took out the finance in the first place.

This could be a tricky process, as it will almost certainly involve negotiation about what is an ‘appropriate’ level of discount. Only embark on it if you really, really want the car.
What happens if I buy a car with outstanding finance?
As long as finance is owing, the car belongs to the finance company; even if you bought it in good faith. If you become the ‘owner’ of that car, you’ll inherit any debt, and the finance company will want that settled.

In that situation, your only course of action is to try to track down the person who sold you the car, which may not be easy, especially if they knew what they were doing. Even if you can find them, you may well have to resort to court action, and that could cost a significant sum.

It may not be the person selling the car that has finance owing. They could also have bought the car in good faith, without realising the financial situation, which only comes to light when you run a check before you buy.
Carrying out a car history check (which costs less than £15 with Auto Trader) before you buy could be the wisest thing you’ve done.