Selling a Car with Finance outstanding on it.

Margaret_Millne

I hope this is the correct place to post, and any advice would be greatly appreciated.

My daughter has been buying a car through the manufacturers finance, but has decided to travel a bit when she finishes Uni in May, and so doesn't see the point of keeping the car.

Her problems are as follows:

She owes about £8500 on the loan, but has been told she can only hand it back and walk away if she pays about another £1500 (I think that is right). The car is presently worth about £10500-£11500, based on adverts we have seen for similar cars.

Am I right in thinking that technically she has to pay the loan back before she can sell the car? And if this is right, how would they know, as long as she does pay off all the loan when she does sell it?

If she continues making the payments, which doesn't make sense, by May she will have paid over £2000 more, and the car will be worth less.

Does anyone know a way out of this, and also has anyone any experience of selling a car via Autotrader on the web?

As I said, and advice would be greatly appreciated.

Debt_Free_Chick

You need to check the terms of the finance deal - especially all the small print. It's not unusual to find that you cannot sell the car until the loan is paid off. And there may be penalties for paying it off early.

It's not unlike traditional HP agreements, where you didn't actually own the car until the HP was paid off.

Sorry - but you'll need to check the terms. Post back if any of the terms are unclear.

Margaret_Millne

Thanks - I think I have a copy of the terms somewhere, or I will have to ask her for hers. There are penalties for paying it off early, I know that, but at least if she can sell the car for more than is owed she will come out on top, and be able to save what she is now paying them.

frequent

If anyone runs an HPI check on the car it will show up as outstanding credit so you can't sell it until you pay the credit off.

Almost every car finance agreement has this clause.

Not to worry, there is a way around it if you don't have the cash to pay upfront.

Just find yourself a credit card that will give you 6 months interest free on a balance transfer (to your current account known as SBT super balance transfer)

Use the credit card money to pay the outstanding finance, sell the car then pay back the credit card with the proceeds of the sale.

Margaret_Millne

Do you know of a credit card provider that will give a student a credit limit of over £8500??

Debt_Free_Chick

Maybe Frequent thought you might consider it an option, as the debt would be repaid once the car is sold - should be less than 6 months?

Perhaps an option .. but it needs to be the right one for you and your daughter. It's a hard way for her to learn, but at least be glad that she's unlikely ever to sign another agreement like that one - at least not without reading & understanding the small print.

Regards

Margaret_Millne

:-[ I agree, it is an option, but I don't think any credit card company would take her on for that sum at present.  She has quite a good credit history with Egg, so might suggest she tries for a loan with them.

I must admit, I was as ignorant as her when she took out the loan - I stood as guarantor :-[ :-[

frequent

I was actually thinking of Mum getting the card and letting daughter use the money to sort out the car.

True it is only an option, getting a personal loan would only further the loss because there will be interest added even if you pay it early hence the idea of 0% credit card.

May I ask if you have requested an "early settlement quotation" (esq).

I did this before when I owed 9k on a car and they offered settlement at 7.5k..might be worth a haggle with them to try save a few more £.

roadrash

Hiya,
I thought I would add my two pennies worth here ;D

I sold a car on ebay last year stating that there was outstadning finance with Black Horse, the guy that brought it paid a good price and I paid the outstanding part on my switch card. As they didnt take credit cards.
So I had to use a credit card cheque to transfer money into my current account and then pay it off...

Anyway, when he came to pick it up, he paud his lot for the car and I paid mine too over the phone with the same person.

Also, I am currently in the process of selling another car with Ford, which has finance on it, for a cheaper more economical car! They are simply paying it off for me and starting a new agreement..

Anyway..

Margaret_Millne

I was actually thinking of Mum getting the card and letting daughter use the money to sort out the car.

True it is only an option, getting a personal loan would only further the loss because there will be interest added even if you pay it early hence the idea of 0% credit card.

May I ask if you have requested an "early settlement quotation" (esq).

I did this before when I owed 9k on a car and they offered settlement at 7.5k..might be worth a haggle with them to try save a few more £.

Mum can't get anymore cards at the moment. I could probably max my Egg card to pay off most of the loan once she had a sale actually lined up, and she could probably do the same with her Egg card - between us we would be able to SBT enough to do this. I don't really want to do this before we are fairly sure of a sale though, as it would incur interest unnecessarily.

OK if the sale doesn't go through we could always pay Egg back, but it is the hassle factor.

We did ask for a settlement figure a couple of months ago, and have adjusted this slightly to take into account payments made since then. They appear to operate this "Rule of 78" thing, which is something I will enquire into in future.

She is going to end up paying the finance company roughly the same whenever she pays it off, hence the decision to sell early rather than later when the car will be worth less.

She is coming home for the weekend, so we will have a look at all the options then.