Selling a Financed Car: What You Need to Know 

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Joe Brayne

Car Purchasing Guru

Thinking of selling your car, but haven’t quite finished paying it off? No worries! Selling a car with a finance agreement is more common than you might think.  

In this guide, we will help you understand the process of selling a financed car, explore your options, determine how much you may owe, and decide if selling is right for you.  

What is the Process of Selling a Financed Car? 

Before we begin, please note that selling a financed car isn’t always a guaranteed option. Since the lender technically owns the car until the loan is settled, your ability to sell depends upon the ownership’s specific rules and regulations. 

If you are thinking of selling your financed car, follow these steps to ensure every base is covered: 

  1. Contact Your Lender: Inform your lender that you’re planning to sell and request a settlement figure. This is the total amount you owe to clear the loan. There may also be a ‘voluntary termination’ option in your contract, which lets you return the car without extra cost if you’ve already paid half of the loan. 
  1. Verify Vehicle Value: Knowing how much your car is actually worth will help you determine a fair asking price. Ensure the car’s value is higher than the remaining loan amount to avoid the pitfalls of negative equity – a situation where you owe more than the car is worth. 
  1. Find a buyer: Decide if you’re selling privately to an individual who understands the process, or explore selling to a dealership which can handle the loan payoff directly. 
  1. Settle the Finance: Pay the settlement figure, including any extra fees. Once the loan is settled, you can transfer ownership of the car to the buyer. 
  1. Transfer the title: With the loan paid off, the lender will release the title, allowing you to transfer ownership to the buyer. 

Discover a wide range of flexible car finance options with Car Loans UK – apply today for a free, no-obligation quote! 

Crunch the Numbers Before Selling 

Selling a financed car involves some financial gymnastics, so before diving in, let’s get a clear picture of the numbers involved. Understanding concepts such as the settlement amount and your car’s market value enable you to make an informed decision throughout the process. 

The Settlement Amount 

This is the total amount you owe to pay off your car finance agreement. It includes the remaining loan balance, any accrued interest, and potentially early termination fees. 

The easiest way to find your settlement amount is to contact your lender directly. They can provide you with a current settlement figure, often called a “payoff quote.” This will give you a precise idea of how much you need to settle the loan before selling. 

Your Car’s Market Value 

As you may expect, many factors impact the current market price of your car in its present condition. However, knowing your car’s market value is crucial for setting a fair asking price and avoiding any surprises. 

To help determine your car’s market value, you have a couple of options are your disposal: 

  • Online Valuation Tools: Websites like AutoTrader offer free car valuation tools. Simply enter your car’s details (make, model, year, mileage, condition) and get an estimated market value. 
  • Used Car Market Research: Check online classifieds or dealership websites to see similar cars being advertised. This gives you a real-world sense of asking prices for comparable vehicles. 

Risks to Consider: Selling a Financed Car 

While selling a financed car is often a possibility, it’s important to be aware of the potential pitfalls before diving in. Key risks to consider include: 

  • Negative Equity: This occurs when your car’s market value is lower than the settlement amount. You will need to cover the difference before settling the loan and transferring ownership. 
  • Early Termination Fees: Some lenders charge fees for ending your finance agreement early. These fees can vary depending on the lender and the remaining term of your loan. 
  • Finding a Buyer: Since the buyer won’t receive a clear title until the loan is paid off, it can be trickier to find someone comfortable waiting for the loan to be settled. 
  • Complications with the Sale: The extra steps involved in selling a financed car, like coordinating with the lender and payoff process, can add complexity and potential delays to the sale. 

If you’re unhappy with your current financing situation, and want to explore if there might be better options available, don’t hesitate to reach out to Car Loans UK. Apply for a quote in just 60 seconds and explore the wider world of car finance. 

Is Selling the Right Choice for You? 

Knowing the settlement amount and your car’s market value equips you to make an informed decision, but selling may not always be the best option. Here are some factors to consider: 

  • Equity: If your car’s market value is higher than the settlement amount (positive equity), selling could free up cash and allow you to upgrade your car. 
  • Negative Equity: As discussed above, if your settlement amount is higher than your car’s market value (negative equity) then selling might not be feasible. 
  • Loan Satisfaction: Are you happy with your current loan terms (interest rate, monthly payments)? Consider refinancing if you can get a better deal that lowers your payments and saves you money in the long run. 

Exploring Your Financing Options 

Instead of selling, consider exploring alternative solutions: 

  • Refinance: Car Loans UK can help you find a lender offering a lower interest rate on your existing loan. This can significantly reduce your monthly payments and free up some cash flow. 
  • Car Loan Extension: Depending on your lender, you might be able to extend your loan term. While this might not lower your overall interest payments, it can make your monthly payments more manageable. 
  • Debt Consolidation: Consolidate your car loan with other debts into a single loan with a potentially lower interest rate. This can simplify your finances and potentially save you money. 

Car Loans UK Can Help! 

No matter your situation, Car Loans UK can connect you with a panel of lenders offering a variety of car finance options. Whether you’re looking to refinance, extend your current loan, or explore other financing solutions, Car Loans UK can help you find a deal that works for you.  

Get in contact with our friendly, specialist team and discover a diverse range of car finance possibilities! 

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