What is Outstanding Finance?

Outstanding finance on a vehicle can lead to serious legal and financial problems. This guide explains what it is, how to check for it, and how to protect yourself.

Understanding Car Finance

Car finance allows people to spread the cost of a vehicle over time. However, until the finance is fully repaid, the finance company legally owns the vehicle, not the person driving it.

Types of Finance Agreements

Hire Purchase (HP)

The finance company owns the vehicle until all payments are made. You cannot sell the car without settling the finance first.

Personal Contract Purchase (PCP)

Similar to HP but with a large final "balloon" payment. The finance company owns the vehicle until you make that final payment.

Conditional Sale

You own the vehicle once the final payment is made, but the finance company has a legal interest until then.

Lease Purchase

The finance company owns the vehicle throughout the agreement. You must make all payments before ownership transfers.

Risks of Outstanding Finance

What Can Happen

• The finance company can repossess the vehicle without compensating you
• You lose both the car and your money
• You have no legal claim against the finance company
• Your only recourse is pursuing the seller (often difficult or impossible)
• It's a criminal offense if the seller knowingly sells a vehicle with outstanding finance

How to Check for Finance

HPI Check

The most comprehensive way to check for outstanding finance is through an HPI check or similar service. This searches databases of finance agreements from major lenders.

What an HPI Check Reveals

• Outstanding finance agreements
• Amount outstanding (approximate)
• Finance company details
• Insurance write-off history
• Stolen vehicle status
• Number of previous keepers

When to Check

Always check before viewing a vehicle or, at the very latest, before handing over any money. Don't rely on the seller's word alone.

What If Finance is Found?

Before Purchase

If you discover outstanding finance before buying:

• Ask the seller to settle the finance before sale
• Meet at the finance company to settle it together
• Walk away if the seller can't or won't clear it
• Never pay the seller expecting them to clear it later

After Purchase

If you discover finance after buying:

• Contact the finance company immediately
• Provide proof of purchase and evidence you weren't aware of the finance
• Consider settling the finance yourself and pursuing the seller
• Report the seller to police if they knowingly sold you a financed vehicle
• Seek legal advice about recovering your money

Red Flags to Watch For

• Seller can't provide the V5C logbook
• V5C shows a recent keeper change
• Seller pressures you to buy quickly
• Price seems too good to be true
• Seller reluctant to provide full details for checks
• Meeting in car parks rather than seller's address

Remember: Spending £10-20 on an HPI check can save you thousands in losses. Never skip this crucial step when buying a used car.