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Why Should I Check if a Car I'm Buying has Outstanding Finance?

If you're buying a car from a reputable main dealer, you won't have to carry out a check yourself to see if there's any outstanding finance or any other unpleasantness associated with it, and that's because it will have been done by the dealer before they bought the car themselves. Most dealers will include a copy of the history report in the sale so you'll have total peace of mind about what you're buying. But if you're not buying from a main dealer that you know does everything properly, it's essential you get a check carried out yourself before parting with any money at all for a vehicle, and here's why.

The Law

It's illegal to sell a vehicle that has outstanding finance, and that's basically because the vehicle is still the property of the finance company until anything owing has been paid off. Technically, you'd be aiding and abetting a crime if you buy a car with finance on it without it being settled, but that's not what you have to worry about. If you're the seller though, don't let your vehicle go to a new owner on the 'understanding' they're going to settle the finance on your behalf as part of the deal unless they are a reputable dealer.

The Consequences

When you buy a car and your name goes on the registration document as the new keeper, the finance company will expect you to make the monthly payments or pay off the outstanding balance, and that could well run into many thousands of pounds. Section 27 of the Hire Purchase Act (1964) does give you a defence in law, which is that you still have good title to the car if you bought it in good faith but the vendor failed to disclose details of any outstanding finance. The problem with that is it could involve lengthy and expensive legal proceedings to defend against being liable for the outstanding money, and it may even cost more to defend yourself than there is outstanding on the vehicle.

Of course, you can buy a car from a vendor if they disclose that there's finance outstanding if you want to, but there are a number of things to consider when doing this, such as who pays it, when and how.

How to settle outstanding finance

The first thing that's needed is an up-to-date settlement figure from the finance company detailing exactly how much money is still due. As the buyer you cannot get this because of the Data Protection Act, but once the seller has obtained it you can confirm it with the lender. Next, one of you has to pay the settlement amount off, but never pay the asking price and rely on the seller to pay it off. You'll be amazed how often they will forget to do it and you'll be left with a whole world of hurt to deal with.

It's not out of the question to be able to buy a car, run it for years and not realise there's outstanding finance due from the owner before the one you bought it from until you come to sell it yourself. Once again, you can defend yourself if you've got solid documentation, but what a lot of hassle, cost and stress you're going to be in for, and you're by no means certain to come out on top.

How to be safe

For a small cost you can get a vehicle history check done yourself on any vehicle you are interested in buying. Not only will this show up any outstanding finance, it will also tell you how many owners it's had, when it's changed owners previously, and if there has been any information recorded against it by an insurance company, such as major accident damage or if it's been stolen.

Alternatively, buy a used car from a well-respected, reputable dealer. You may well pay more than buying private, but you'll get the kind of peace of mind that's almost priceless.

21 December 2016

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