Can I sell a car on PCP finance?
Whether you are looking to sell your car outright or want to part exchange it, selling a car with outstanding PCP finance is possible. However, the process involves several steps, and it’s important to understand how PCP finance works and what your options are. To learn more about the differences between PCP and HP, go to our finance dedicated page. Below, we dive into everything you need to know about selling a car on PCP finance.
How does PCP Financing Work?
PCP (Personal Contract Purchase) finance is one of the most popular ways to finance a car. With PCP finance, you pay a series of monthly payments over an agreed period, typically two to four years. These payments cover the car's depreciation, interest, and a portion of the car's value. However, even if you continue paying until the end of the agreement, you don’t fully own the car unless you make the final lump sum payment, known as the ‘balloon’ payment. This amount is usually quite significant.
Alternatively, you have the option to hand the car back to the dealer without paying the balloon payment or begin a new PCP agreement on a different car. So, if you're considering selling a car on PCP finance, you’ll need to address this outstanding balloon payment or settle the current finance agreement.
Isn’t My Car Owned by the Finance Company?
Technically, under PCP finance, the car is owned by the finance company until the final balloon payment is made. This means you can’t simply sell the car without settling the outstanding finance. However, selling a car on PCP finance is possible, and car dealerships can often help you settle the finance when you decide to sell or part exchange your vehicle.
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 finance 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 finance 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 to Settle PCP Finance
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?
Selling a car on PCP privately is a bit more complicated, but it’s still possible. Most private buyers may be hesitant because the car technically belongs to the finance company until the balance is paid off. However, you can still sell a car on PCP finance privately by following these steps:
Settle the finance before the sale. You’ll need to settle the outstanding PCP finance before handing over the car to the buyer. Failing to do so is considered fraud.
Provide the buyer with the settlement figure. If you can’t settle the finance before selling, you can show the buyer the settlement figure letter from the finance company. This allows the buyer to pay the finance company directly and ensures that the car is fully paid off before the ownership transfer.
Handle the payment correctly. If you’re in positive equity (the car is worth more than the settlement amount), the buyer will pay you the difference. If you’re in negative equity, you’ll need to cover the shortfall.
Selling a car on PCP privately requires trust between the buyer and seller, as the process isn’t immediate. The buyer must wait for the finance company to confirm the settlement before they can take ownership of the car. Make sure you read out tips guide on how to boost your car's value before you sell it.
Interested in PCP Finance for Your Next Car?
If you're considering PCP finance for your next vehicle, you can use our finance checker to see how much you can afford without affecting your credit score. Whether you’re looking to part exchange or sell a car on PCP finance, it’s essential to understand your financial situation and explore your options.
Selling a car on PCP finance is entirely possible, but it requires careful planning. You must either settle the finance or work with a dealership to handle the settlement for you. Whether you’re looking to part exchange, sell privately, or settle the loan yourself, understanding how PCP finance works and your current financial position is essential to avoid negative equity and ensure a smooth transaction.
If you’re considering selling a car on PCP finance or need expert guidance on part exchanging your vehicle, contact Prestige Cars Kent today. Our team can help you navigate the process, provide a fair valuation, and settle your finance seamlessly. Get in touch with us now to explore your options and take the next step toward driving your dream car!