Outstanding finance is one of the biggest hidden risks when buying a used car. If a vehicle still has money owed on it, the lender owns it – not the seller. Buy it, and you could lose both the car and your money.
What is outstanding finance?
Outstanding finance means the car is still linked to a loan or hire purchase agreement. Until the finance is fully repaid, the lender remains the legal owner of the vehicle.
In other words: if you buy a car with outstanding finance, you don’t truly own it – the finance company does.. More information on finance agreements are provided on the Finance & Leasing Association’s Financing Your Car website.
What happens if I buy a vehicle with outstanding finance?
If you buy a car that still has finance:
- The lender can repossess the car, even if you paid for it in good faith.
- You risk losing both the vehicle and the money you handed over.
This is why running an outstanding finance check before buying is absolutely essential.
Do I not have legal protection if I buy a car that has outstanding finance?
Under the Hire Purchase Act 1964, genuine Innocent Private Purchasers (IPP) may have some protection if they unknowingly buy a car with outstanding finance.
But there are important caveats:
- You must prove you bought the car in good faith.
- The lender can challenge your claim.
- You may need to provide detailed evidence and even attend court.
- The car can be repossessed while the case is investigated.
Relying on legal protection is risky and stressful – far better to check before you buy.
Why finance checks are crucial in today’s used car market
While finance checks have always been important, the current used car market carries extra risks:
- With high sales volumes, the chances of buying a used car with hidden finance are greater than ever.
- Used car prices remain high.
- Many financed vehicles now have equity, encouraging sellers to cash in early.
- Sellers should settle finance before selling – but not all do.
Our top tips when buying a vehicle
- Run an outstanding finance check
- Always use a vehicle history check that includes finance information.
- Check the Vehicle Identification Number (VIN) matches across:
- The car itself (engine bay, door sticker, windscreen plate).
- The VIN’s last 4 digits on the vehicle check report.
- The V5C registration document.
- This protects against car cloning and you can use Total Car Check’s free VIN check tool.
- Watch out for suspiciously low prices
- If the car is priced well below market value, it may have hidden issues – and could undermine any claim of being an “innocent buyer.”
- Inspect the car’s condition
- Check tyres, bodywork, and general condition against the seller’s description.
- Never pay upfront deposits
- Only pay once you’ve viewed the car in person and confirmed its details.
Final word: Protect yourself with a quick finance check
Buying a car with outstanding finance could cost you thousands. A car finance check takes seconds and gives you peace of mind that the vehicle you’re buying is truly free to own.
Don’t risk it – always check a car for outstanding finance before you buy.