How To Check If a Car Has Outstanding Finance?

If you’re in the market for a new car, it’s important to know whether the vehicle has any outstanding finance to avoid buying a car that still belongs to someone else. 

Here’s how to check if a car has outstanding finance.

What Is Outstanding Finance on Car Check? 

Outstanding finance is the amount of money that’s owed on a car loan or finance agreement since the last repayment. 

In the UK, it is illegal to sell a vehicle that has outstanding finance without notifying the finance company and the buyer.

The main reason for that is that you can’t legally own a vehicle that hasn’t been completely paid off. Until the debt has been settled, the legal owner of the vehicle is the finance company. 

That means that if you purchase a car that has an outstanding balance, you won’t be able to claim the vehicle as your own until the seller settles the debt or until you pay off the remaining sum.

What Does An Outstanding Finance Check on Vehicle Shows? 

An outstanding finance check will tell you whether there is a loan or finance connected to the vehicle you want to buy.

If the finance vehicle check finds that the vehicle is still being paid off, it will show the name of the company that provided the finance agreement. 

You can then contact the finance company and ask if the debt has been settled. They will confirm whether the person who’s trying to sell you the car still owes money for the vehicle.

What Type of Car Finance Could Be Outstanding?

There are several ways to buy a car on finance, including:

• Personal Loan 

When taking out a personal loan, you’re essentially borrowing money from an independent lender, a bank, or a building society to purchase the vehicle. In this case, the loan isn’t tied to the car but the borrower. This means they can resell the car, but they would still owe money to the lender, regardless of who owns it.

• Leasing 

Leasing is similar to a long-term rental –the borrower won’t be able to buy the car at the end of the agreement unless the lessor offers to sell it to them. If you need to lease a vehicle for your business, you might want to consider a finance lease.

• HP (Hire Purchase)

An HP is similar to a loan. With an HP agreement, you can spread your payments over a certain period, and once you pay the last repayment, you get full ownership of the vehicle. 

• PCP (Personal Contract Plan).

A PCP (Personal Contract Plan) is an agreement that’s more similar to a lease. You may in monthly instalments, but you’re not paying the full price, and you won’t own the vehicle once you finish your repayments – unless you pay the final Guaranteed Future Value (GFV) of it at the end of the contract.

• Credit Sale Agreement 

In a credit sale agreement, the borrower gets ownership of the car immediately and then repays the money they borrowed to purchase the vehicle to the lender.

How To Check If a Car Is On Finance

The quickest way to check if a car is on finance is via an online checker. Most checkers require entering the vehicle’s registration number.

In 2022, the top 5 websites that offer vehicle finance checks are: 

1. DVLA
2. HPI
3. AA
4. RAC
5. MotorCheck

If you want to avoid performing an online outstanding finance check on a car, you can ask the seller to show you the log book (V5C) for the car. If they don’t have one, ask them to apply for a new one with the DVLA. 

Once the seller gives you the log book, which has information like make and model, MOT test number, and registration number on it, you can then call the DVLA directly and ask them to check if the vehicle has any markers. 

They will let you know if the vehicle’s been stolen or has been recalled. 

What To Do if There Is Outstanding Finance on a Car 

Although it is illegal to sell a car without the owner’s permission (in this case, the finance company) and without informing the buyer of the situation, that doesn’t stop people from doing it. 

Here’s what you can do if you find out that the car you want to buy is still on finance:

• Before buying it

If you check outstanding finance on a car and the report reveals that the car has outstanding finance tied to it, you can ask the seller to settle the remaining debt before you move forward with the purchase. 

If they agree, ask them to provide evidence that they’ve paid off the debt. 

• After buying it

If you’ve done a finance check on the car after you’ve made the purchase, you can claim that you bought the car in ‘good faith’ to keep it. The finance company might ask you to pay the remaining debt.

Can You Keep a Car With Outstanding Finance?  

You may still be able to keep the car if it’s on HP or conditional sale and you have a ‘good title.’

Having ‘good title’ essentially means that you bought the car in ‘good faith’ with no prior knowledge of its finance. You can claim ‘good title’ if you haven’t done an outstanding finance check or if the check you performed didn’t flag any issues.

If the finance company contacts you, you can write to them explaining that you didn’t know the car was on HP or a conditional sale. You should include:

• the name and address of the seller
• the date you bought it
• details of how the car was advertised
• how much you paid
• proof of purchase

Keep in mind that it is up to the finance company to prove that you don’t have a ‘good title’ and not the other way around. 

How Can You Get Rid of a Car With Outstanding Finance? 

If you want to sell your vehicle before finishing paying it off, you should find a buyer that’s willing to pay the difference. You should also discuss your options with the finance company. 

In some cases, it is possible to voluntarily terminate an HP or PCP finance agreement –if you have paid at least half of the full amount– and return it to the finance company. To do this, you will need to meet certain requirements, such as returning the car in a ‘reasonable’ condition.

Bottom Line

Performing a check finance on a car is crucial before making a purchase.

 With most finance agreements, the vehicle doesn’t belong to the keeper until they pay what they owe, and if you don’t check finance on a vehicle, you might end up having to pay off the seller’s debt.