"So, you might be thinking that if you paid the full asking price for the car, whether in cash or otherwise, that it is then legally yours. Wrong."
Sophie van der Singel
What you should do if you bought a car with outstanding finance on it
Having bought a car with finance still outstanding could cause you some significant trouble. It means that you bought a car from a seller who did not own the car outright and was driving it merely thanks to their hire-purchase agreement with a car finance company.
They did not own the car and therefore did not have the right to sell it to you. Because they did not own the car, even though you paid the seller, neither do you.
Simply said; a hire-purchase agreement is a car finance plan that allows a person to drive a car for a set time period for an agreed upon monthly payment. The agreement states that the registered driver does not own the vehicle until they have paid off the full price agreed on.
Unfortunately, cases where buyers unknowingly bought cars with outstanding finance are becoming increasingly regular, making it entirely possible that you have bought your second-hand vehicle without being aware of this issue.
Why should you be concerned about outstanding finance?
So, you might be thinking that if you paid the full asking price for the car, whether in cash or otherwise, that is is then legally yours. Wrong.
Surely, its finance history means nothing to you as you never signed a hire purchase agreement and are now presumably the registered keeper?
Unfortunately not. No matter how much you paid for the car and who you paid it to; if the vehicle has outstanding finance then it still belongs to the finance company.
Even if you had no idea that the car has outstanding finance, the company owning the vehicle will. You can expect the car finance company to track you down swiftly to repossess your car or provide you with an invoice for the outstanding debt.
If they don’t repossess the car from you, they may request that you pay the outstanding balance. This could be any type of amount as it will depend on how long the car was driven for, the value and the other details of hire purchase agreement. However, cars are normally much more expensive through hire purchase agreements as they would be to buy outright. And in addition, don’t forget, you already bought the car outright so paying such a balance would be an additional cost.
The importance of HPI checks
Obviously, if you are already in the situation of dealing with a car that has outstanding finance on it, then this step is not for you. It is however a smart move to bear this in mind for any future purposes.
An HPI check is a “Hire Purchase Inspection” and should be ran before a purchase is finalised.
Such a check will generally cost you around £30 and will show you instantly if the car you are interested in buying has outstanding finance.
The importance of these checks is highlighted by the high likelihood that a second-hand car for sale has outstanding finance. In the UK, an incredible 25% of used cars that are checked yearly fail the HPI check and actually do have some amount of outstanding finance, leaving buyers in a concerning position.
The check can further tell you if your car has had its number plates changed, been internationally exported, written off or stolen. Did you know that as many as 30 cars are stolen in the UK daily?
This information will be gathered with the help of the DVLA, the Police National Computer database, insurance firms and the National Mileage Register.
Making an outstanding finance claim
The best step for you to take next would be to contact an experienced HPI claims solicitor who has indisputable legal knowledge of the motor industry and these complex cases.
They can help you claim back your payment, or the vehicle, depending on your situation.
