Can I sell a car on PCP finance?
Whether you are looking to sell your car outright, or want to part exchange, you can sell a car with outstanding PCP. We go into the details below.
How does PCP financing work?
You’ll currently be paying a series of monthly payments over an agreed period. The amount you pay is paying off the car’s depreciation, as well as the interest. If you keep paying until the end of the agreement, you still don’t own the car as there is a final lump sum (sometimes called the ‘balloon’ payment) to pay. However, rather than paying this, you’re able to simply hand the car back to the dealer you bought it from, or begun a fresh finance agreement on your next car.
Isn’t my car owned by the finance company?
Technically, your PCP agreement means your car is owned by the finance company. However, car dealers are able to easily settle finance on a car, which will allow you to get out of your current agreement and get yourself in the seat of a new car.
Alternatively, you can settle the outstanding finance on your PCP deal yourself by getting in touch with the finance company. The crucial element is that the finance needs to be settled before you hand over the car to a private individual.
How can I avoid being in negative equity?
If you end up selling the car for less than what you still owe on your PCP loan, you'll be responsible for paying the difference – i.e. “negative equity.”
Most car financing agreements start with the buyer owing more than the car's worth. This is because cars depreciate quickly at first, but then the payments catch up, leaving you in positive equity at around the halfway mark of the agreement.
As a result, some PCP agreements allow you to return the car at 50% through the contract and terminate it as a result. Alternatively, you can go to a car dealership to get them to settle the finance on your behalf, allowing you to begin a new agreement on a different car.
Generally speaking, you can mitigate being in negative equity by ensuring you don’t exceed the agreed annual mileage, and making sure no damage is on the car that would affect its valuation (if you are thinking of Part Exchanging).
How do I find out how much I owe the finance company?
If you would like to change cars, the first thing to do is request a settlement figure from your finance company – everything you owe to become the owner of the car.
You have to get a response within 12 days, but most finance companies are quicker. Alternatively, if you’re looking to buy another car through a dealership, they can likely get the figure for you if they have a working relationship with the finance company.
Once you have that settlement figure, you have 10 days to sell your car at the amount shown. No problem if you can’t; you just need to request an updated settlement figure.
What if I wanted to sell my car privately?
You can still sell a car privately if it’s on PCP, but the likelihood is you will put off a lot of potential buyers, as they will be understandably nervous about the arrangement.
You must settle the finance first, before handing over the keys and logbook. If you don’t, you are committing fraud.
If you can settle the finance yourself beforehand, then this is either. However, if you require the buyer’s funds to do this, you will need to provide the buyer with your settlement figure letter, so they can pay your finance company directly. If you are in positive or negative equity, the buyer can then pay you separately for any amount over what is owed to the finance company.
It’s then a case of contacting the finance agreement to check the car is then paid for. This process requires the buyer to show a lot of faith in you as the seller, as the process isn’t necessarily immediate, and relies on showing trust with no safety net.
Interested in financing your next car? Use our finance checker to see how much you can afford, with no impact on your credit score.