Risks of Buying a Car with Outstanding Finance

Buying a car can be an exciting experience, but it also comes with its fair share of risks, including buying a car with outstanding finance.

With more and more vehicles purchased on finance, there’s a big chance that the vehicle you are interested in may just have finance owing on it. What this means is that you could end up paying someone else’s debt owed on the car or have the vehicle repossessed, and you lose your money and car.

To avoid these risks, it is extremely important to run a full car history check before paying for a vehicle. In this article, we explain the risks involved in buying a car with outstanding finance and find out the best ways to ensure you steer clear of one.

What is Outstanding Finance on a Car?

Outstanding finance is the money owed on a vehicle, outstanding and not yet fully paid by the owner. In other words, the owner is still making payments for the car. 

Almost 90% of private car buyers cannot afford to pay for a vehicle without some form of financial aid. When a buyer pays for a vehicle with financing, the lender becomes the actual owner of the vehicle and the buyer needs to pay off their contract before they legally own the vehicle.

In a situation where the car owner feels like it’s time to sell their financed vehicles , they must settle the debt before they can sell it. It is even illegal to sell a car with outstanding finance, but somehow, some of these vehicles end up on the market.

When you come across such vehicles, it is best to avoid them since you may find yourself facing financial and legal complications along the line.

However, if you already bought the vehicle and had no idea about its outstanding finance, you have the right to keep it. This is called ‘good title’ and means you bought the car in good faith without knowing it had outstanding finances.

READ ALSO: UK Vehicle Registration Car Check

Risks in Buying a Car with Outstanding Finance

When buying a car with outstanding finance, there are several common risks that you should be aware of. They are:

Repossession by the lender

Legally, the lender is the rightful owner of a vehicle with outstanding finance. This means if you find yourself with such vehicles, there’s a high chance that the lender can come walking through your door one day to claim and repossess your vehicle.

Hidden debts

There are chances that buyers could be getting the financial liabilities within the vehicle. You may end up paying off that debt owed, which will definitely affect your finances and may cause you to run into more debts.

Legal Issues

Buying a financed car means you are very likely to face a legal dispute over the ownership of the car. You may face court cases and losses if the lender claims the car due to non-payment of dues against the vehicle.

Aside from losing the vehicle, you will also end up spending money to get a representative in court and pay some other fees.

Lack of legal protection

Although buying from a dealer may come with some level of protection, such as Innocent Purchaser Protection, buying privately generally will not afford such protection. Thus, if some issues arise subsequent to the sale, there is little you can do.

These are some of the risks involved with getting a vehicle with outstanding finance. You can, however, stay on the safe side by checking a car’s records to verify outstanding finance and other car records before making any purchase.

Can You Sell a Car with Outstanding Finance?

You should never attempt to sell a car with outstanding payments without a written agreement that clears any debt, as the finance company can prove you still owe money. The finance company retains ownership until the final payment is made.

If you need to sell a car with outstanding finance, you should:

1. Pay Off the Finance: Contact the finance company and settle the remaining balance.
2. Obtain a Settlement Figure: Get a written confirmation from the finance company that the finance has been settled.
3. Inform the Buyer: Be transparent with potential buyers about the car’s financial status. Make sure to provide proof that the car no longer has outstanding finance.

How to Verify Outstanding Finance

Avoid buying a car with outstanding finance and protect yourself from risks by verifying the finance status of a car using these methods:

1. Use a vehicle history report service

Smart Car Check is one of the top outstanding finance check tools that allows you to check the past records and registration data of any vehicle, including outstanding finance. 

Not only that, you also get the following data about the vehicle::

• Outstanding finance
• Date of agreement
• Term of agreement
• Type of agreement
• Agreement number
• Finance company
• Contact number
• Vehicle description

This tool practically shows everything you need to know about the agreement, including a contact number so that you can reach out to the finance provider and get all the information you need to make a decision.

2. Check with finance companies or lenders

It is always a good idea to check with the finance company to ensure no outstanding finance on the car.

If the previous owner claims to have paid the car in full, you can ask them about the lending company that they used. Then, you can contact the lending company directly to check the status of the finance agreement. This step clarifies any uncertainties from your initial checks and helps you make a decision.

3. Obtain the car’s registration details

Get the registration number of the car and the VIN to check the vehicle’s registration details and financial records. A car reg check usually covers this, but you can take it a step further and check with the DVLA. This makes sure that everything is in order and matches what the seller says.

Following these steps will help you make an informed decision and remove the risk of financial and legal problems before buying a used car.

Conclusion

Buying a vehicle with outstanding finances is highly risky in all aspects, as it involves many financial losses and legal complications. It becomes crucial on the part of buyers to perform all necessary checks and verify the financial status of every vehicle against possible purchase.

To avoid any of these problems, follow the verification steps initiated above, besides taking professional advice where necessary. This way, you will be able to enjoy your new car, free from any hidden financial burdens.

Frequently Asked Questions