Last year, Thomas bought a nice Audi A1 three-door. He opted for this little city car because it consumes almost nothing and can be parked anywhere. To finance it, he took out a loan of £22,000 to be repaid over 5 years. However, he is currently facing big changes in his life and wants to switch to another model. Indeed, he and his wife are expecting a child and a three-door car is not the most practical thing to do with a maxi cosi. So he wants to buy a bigger car that is better suited to their new needs. But is Thomas allowed to sell his car still on credit even though it is almost new? Moreover, he has a car loan outstanding and still has to pay 48 monthly installments (i.e. 4 years)? The answer will depend on the type of credit he took out a year ago.
Choice of personal loan
In the case of a personal loan agreement, yes, Thomas can resell his car while still on credit.
But why? Well, this type of credit is unaffected, which means that it is not intended to finance a particular product. He was not required to provide a purchase order or any other proof of purchase. As a result, he received the amount requested at one time, allowing him to use it as he sees fit: the car is therefore his property in its own right and he can resell it without any worries. On the other hand, since the bank has no guarantee of repayment and no collateral, Thomas has to repay the amount borrowed with a higher interest rate than a car loan. Indeed, the rates for a personal loan vary between 4.95% and 10% in UK.
He therefore sends a registered letter to his bank at least 10 days before his next monthly payment (attention: these conditions vary from one organisation to another). On the other hand, he should be aware that he may have to pay an indemnity, which cannot be higher than :
- 1% of the sum reimbursed at once if he still has more than 12 monthly instalments to pay;
- 5% of the sum reimbursed at once if he has less than 12 monthly instalments to pay.
Now that he has paid off his loan in full, Thomas can start looking for a way to sell his car on credit. And to do so, he has several options:
- Take the easy way out and negotiate a trade-in directly with the dealership where he plans to buy his new car. On the other hand, he will get less than if he sells it to a private individual.
- Sell it to a car dealer without having to worry about finding a buyer.
- Take care of selling his car and place ads on various sites, such as Autocount24.
Choice of car loan
Here, the answer is not so simple. Indeed, since car credit is an earmarked loan (the loan is requested in order to buy a vehicle), each organization sets its own conditions. For this type of credit, Thomas had to provide the purchase invoice or purchase order to prove the use of the sum that was going to be allocated to him. In addition, financial institutions may request that the vehicle be used as a guarantee in the event of non-payment. This makes it very difficult to sell the vehicle, since the bank retains ownership until the loan has been repaid in full. However, this is sometimes negotiable if the sale allows the vehicle to be repaid in full.
So you have understood: selling your car while still on credit is possible, but it is essential to weigh up the pros and cons of each decision and to study the various possibilities available to you. The car of your dreams is yours! And if you want to finance it with credit, you can simulate all the offers on TopCompare.uk.