Buying a used car is a great way to get on the road without forking over a fortune on a new vehicle. But as with anything, finding a bargain comes with risks.
One of the most frequently overlooked risks when it comes to buying a used car is financing. While you probably already know to check the car’s V5C logbook, inspect it for damage, and take it for a test drive, buying a used car with outstanding finance can cause severe problems for you down the road.
How to check whether there’s outstanding finance on your used car
Thankfully, it’s quick and easy to determine whether the used car you’re looking to buy is subject to an unfinished finance agreement. All you need to do is run a car registration check or look at the vehicle history.
If you’re purchasing the car from a dealer or garage, they may be able to run these checks for you if you ask them to.
Why does it matter?
If a vehicle was purchased using a finance agreement that hasn’t been fully repaid, then the finance company technically owns the car, not the seller.
This means that if you purchase a car with outstanding finance, and the repayments are not met, the lender could be entitled to repossess the vehicle.
Although it’s not illegal to purchase a car with financial problems, it is a legal requirement for a seller to clear any outstanding debts against the vehicle before selling it.
What should I do if I want to buy a used car that has finance problems?
If the seller has been up-front with you about any financial problems they have relating to the vehicle, it is still possible for you to purchase your dream used car. There are generally two options for this:
- The seller repays the finance provider in full before you buy the car
It’s vital that you see proof the finance has been repaid which you can do via Just Car Checks before you hand over any money. Even trustworthy sellers can forget to make repayments and cause you issues down the line.
- You agree to repay the finance company for a reduced sale price
The seller will need to contact the financial provider for a settlement figure which you should confirm with them directly. If the cost of settling outstanding finance exceeds the value of the vehicle, walk away.
If you didn’t know about any finance problems with the vehicle before you purchased it, you might still be protected under section 27 of the Hire Purchase Act 1964. However, this comes with risks, so you’re far better off running a quick check to determine whether a used car has any outstanding finance before buying it!