What outstanding finance means
Most new and nearly new cars are bought on finance. With hire purchase (HP) or a personal contract purchase (PCP), the finance company owns the car until the last payment is made. The driver is paying to use it, with the option to own it at the end.
So a seller who still owes money on HP or PCP usually does not own the car, and may not have the right to sell it. The finance has to be paid off, or settled, first.
Other kinds of borrowing work differently. With a personal loan, the borrower owns the car. A logbook loan secures the debt against the car, and the lender may be able to take it.
What it means for you as a buyer
If you buy a car with finance still owing, the debt does not simply disappear. The finance company can contact you and try to reclaim the car. You could lose the car and the money you paid, and be left trying to recover it from the seller.
There is some protection. Under Part III of the Hire Purchase Act 1964, a private buyer who buys a car in good faith, without knowing about an HP or conditional sale agreement, can in many cases keep it. Relying on that is stressful: you may have to show that you bought honestly and did not know, and it does not cover every kind of finance or every buyer. It is far better to find out before you pay. This guide is general information, not legal advice; if a finance company contacts you, get advice, for example from Citizens Advice.
How to check for outstanding finance
- Use a finance check. Finance companies record their agreements on private registers. To see them, buy a paid vehicle check that comes with finance data, from a provider that holds it. Run it on the car you are about to buy, close to the day you pay. See how the checks compare.
- Ask the seller. Ask directly whether there is any finance on the car. If there was and it has been paid off, ask for a settlement letter from the finance company confirming the agreement is settled.
- Match the V5C and the seller. The name and address on the log book (V5C) should match the seller's ID and where you view the car. The V5C shows the registered keeper, not the owner, so it does not prove there is no finance.
- Pay traceably. Pay by bank transfer when you are with the car and have checked the paperwork, and get a written receipt with the seller's name and address. Never pay cash to a stranger or a deposit for a car you have not seen.
If the seller says the finance will be paid off from your money, do not hand it over until the finance company confirms in writing how the settlement will be made. Paying the finance company directly, with a settlement figure from them, is safer than paying the seller and hoping.
What RegTail checks, and what it does not
RegTail does not check for outstanding finance. Every RegTail report marks finance as not checked. Use a paid check with finance data for that.
What RegTail does check:
- MOT history. Every MOT test on record, with its defects and advisories.
- Mileage. The odometer reading at each test, so you can spot gaps and drops. See how to spot clocked mileage.
- The advert. The full report tests the seller's claims against the records and builds a viewing checklist for that car.
The full report also gives odds for what the next MOT may find. They are an estimate, not an inspection.
The free check shows the current MOT status and condition of any car. The full report costs 1 credit; see pricing.